A PUBLIC SECTOR FINANCIAL DREAM:
NEW YORK'S BATTERY PARK CITY DEVELOPMENT
by
Thomas Kurt Oppenheim
Bachelor of Arts
Dartmouth College
1983
SUBMITTED TO THE DEPARTMENT OF URBAN STUDIES & PLANNING
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS OF THE
DEGREE
MASTER OF SCIENCE IN REAL ESTATE DEVELOPMENT AT THE
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
SEPTEMBER 1990
Thomas Kurt Oppenheim 1990
The Author hereby grants to M.I.T.
permission to reproduce and to distribute publicly
copies
of this thesis document in whole or in part.
I
Signature of the author
--
f
'
&ppenheim
Th&
&urt
Oppenheim
Department of Urban Studies and Planning
July 27, 1990
Certified by
'Lynne/S. Xiagalyn
Associate Professor, De$)rtment of Urban Studies
and Planning
Thesis Supervisor
Accepted by
)
Gloria Schuck
Interdepartmental Degree Program in Real Estate
Development
S
MSSAC
3F
TLo
SI NS Tr
SEP 19 1990
LIBRARIES
i
A PUBLIC SECTOR FINANCIAL DREAM:
NEW YORK'S BATTERY PARK CITY DEVELOPMENT
by
Thomas Kurt Oppenheim
Submitted to the Department of Urban Studies & Planning
on July 27, 1990 in partial fulfillment of the
requirements of the degree Master of Science in Real Estate
Development at
the Massachusetts Institute of Technology
ABSTRACT
This thesis analyzes the financial aspects of the
Battery Park City Development (BPC), a massive 92-acre
urban complex containing the World Financial Center, over
4,000 units of residential living, and numerous public
parks and open space areas. The framework for the capital
structure involves a complex series of partnerships between
the public and private sector as well as between the City
and State of New York. The evolution of these arrangements
and, in particular, the various contractual obligations and
risks of the public sector, are examined to reveal how
this large-scale real estate development blossomed from
the early years of financial disaster to the highly
successful monetary levels it has obtained today.
A financial model has been composed that simulates the
current BPC flow of funds to estimate, given conservative
revenue projections, the magnitude of future resources that
will become available to the City and the State for uses
other than the project itself. Additionally, the impact of
varying economic conditions on BPC's capital structure is
examined to prove the strength of the project's financial
capacity to withstand significant downturns in the local
economy and changing New York tax policy.
The paper concludes by answering what government
entity has gotten what funds for what purpose, and who
can be expected to receive the tremendous benefits the
project will generate in the future. The potential risks,
if any, that lay ahead for the public sector are outlined
to confirm the unlikelihood financial trouble will ever
invade the Battery Park City Development again.
Thesis Supervisor: Lynne B. Sagalyn
Title: Associate Professor, Department of Urban Studies and
Planning
To my father, Edgar R. Oppenheim
A PUBLIC SECTOR FINANCIAL DREAM:
NEW YORK'S BATTERY PARK CITY DEVELOPMENT
ABSTRACT.................................................. 2
LIST OF EXHIBITS.........................................5
CHAPTER ONE -
INTRODUCTION...............................6
CHAPTER TWO -
THE CAPITAL STRUCTURE: A PROCESS OF
EVOLUTION.................................11
The Partnership(s) Arrangement.............11
Anticipated Lead Time.....................13
Problems with Initial Plan................15
Fiscal Crisis and Reformulation...........16
Benefits of the New Capital Structure.....21
New Era Of Financial Health................22
Leveraging Lease Revenues.................25
Spreading The Wealth......................27
CHAPTER THREE -LEVERAGING THE BENEFITS OF PRIVATE
DEVELOPMENT...............................32
From Lease Revenues to Bonded Debt........35
Modelling The Flow of Funds................41
Testing The Sensitivity Of Revenue Flows..53
CHAPTER FOUR - ALTERNATIVE FUNDING FOR THE $600
MILLION HOUSING COMMITMENT................64
Counting on Borrowed Money................65
Recommendation............................79
CHAPTER FIVE- CONCLUSIONS AND SPECULATION................83
Who Benefits?.............................84
Risks Ahead...............................97
NOTES
.................................................. 102
APPENDIX A -
BASE-CASE SCENARIO COMPLETE FINANCIALS.....107
APPENDIX B - ALTERNATIVE SCENARIO COMPLETE FINANCIALS... 114
LIST OF EXHIBITS
Chart 2.1 -
Capital Structure of BPCA (1968-1990). .......31
Chart 3.1 -
Flow Of Funds. ....................................... 37
Figure 3.2- Summary Of Base Case Scenario...........
....
46
Graph 3.3 - Application Of Revenues.................
....
51
Figure 3.4- Comparison Of Sensitivity Analysis......
....
56
Graph 3.5 - Application of Revenues
(Between Scenari os).58
A&C Funding From Excess Revenues........
....
59
Chart 4.1 - Base Case Scenario (Flow Chart).........
....
66
Chart 4.2 - Alternative Scenario (Flow Chart).......
....
67
Figure 4.3- Comparative Analysis
(With A&C vs. W/Out A&C)................
....
69
Graph 3.6 -
Graph 4.4 -
Funding $600 Million Housing Program...... .. 72
Graph 4.5 -
Base Case Scenario (Components of Funding) .. 74
Graph 4.6 -
Alternative Scenario(Components of Funding ).76
Graph 4.7 - Freed Monies Due To Leveraging............ .. 78
Figure 5.1- Sources and Uses of Bonds Issued By BPCA.. .85
.89
Figure 5.2-
Future Sources and Uses of Funds..........
Figure 5.3-
Combined Current and Future Sources/Uses.. .92
Graph 5.4 - Who Benefits From BPC Funds?..............
.94
CHAPTER ONE
INTRODUCTION
Battery Park City development as
Most people view the
display
prestigious
commercial
residential
high-rent
towers and
with
beauty
architectural
of
a wonderful
Today, the project consists of more than 6 million
living.
square feet of "electronically
towers ranging
from 33 to
in height
Over 280,000
space surround an 18,500-square-foot
square feet of retail
Garden",
the "Winter
areas for
open eating
and two
51 stories,
house" buildings.
nine-story octagonal "gate
atrium,
smart" office space in four
containing restaurants
everyone.
and
spectacular public
This
space opens onto the North Cove harbor which has become the
place
resting
a 3.5-acre
Additionally,
River provides
found
in other
of
yachts
for
the
rich
Manhattan
often not
fresh air that is
developments.
residential
The
the project, currently located
components of
Hudson
facing the
public plaza
the breath of
famous.
and
to the south
of the World Financial Center complex, are comprised of two
phases:
the Gateway
close to
Plaza
4,000 rental
and
Rector Place.
Combined,
housing and condominium
units have
future plans to provide 10,000
been sold or occupied, with
additional
housing
commercial and
effectively
units
in
the next
residential components
connected by
a
few
of the
years.
The
project are
partially completed
1.2-mile
riverfront esplanade and strategically located public parks
and open space.
underway.
30-acre park are currently
create a
the
Future plans to complete the esplanade and
traditional flavor
exudes
consistent architecture
project,
entire
of New
Throughout
the
successfully connects
York and
quality and beauty into one force.
This massive extension of
be a constant reminder of
how responsive city planning and
What
development.
real estate
breed a successful
measures can
urban design
lower Manhattan will always
cannot be
eye,
the visible
to
seen
however, are the financial arrangements that have made this
structure because it
and creative
economic
changing
project.
project
conditions and
persisted over
that have
a pliable
formation represents
(BPC)'s capital
Park City
important, Battery
Certainly as
a reality.
"9th" wonder
demands of
has met the
opportunities
emerging
year history
the twenty
of the
As tomorrow nears, the monetary benefits that the
promises to
provide will
itself and benefit other areas
the project
spill over
In an attempt
of the City.
to ascertain these benefits, this paper focuses on the real
hidden
treasure of
Battery Park
City
-
-
its
financial
structure.
As a professional in New York during most of the 80's,
took me directly past the 92-acre
my daily commute to work
BPC project.
My initial recollection
barren,
the
exceptions
Gateway
Plaza, and
another.
structures
As
the
being one
the embryonic
years
comprising
the
was of a site nearly
residential
construction stages
progressed,
World
building,
however,
Financial
the
Center
of
four
and
several residential projects took full shape as they neared
During this six-year period, questions I often
completion.
responsible?
are not
simple.
financially,
and as
undergone change
result the
a
As
these nagging questions
been successful,
has not always
The BPC
was
and if so, for whom?
Does it make money,
imagined, the answers to
could be
Who
take?
it
long did
How
whom?
By
financed?
enormous undertaking get
how did such an
asked myself was
has
capital structure
project finally
numerous times until the
found itself on firm footings.
answers "who? and how?" the
Chapter Two of this paper
examining in-depth the composition
project was financed by
of
the
chapter
capital
traces
of Battery
structure
the
events shaping
money was raised to finance
history, starting in 1972 when
the
activity up
initial landfill
budget deficit
Additionally, a
to date.
most recent
that took
the project's financial failures
place provide insight for
and successes
to today's
The pivotal events
bond issue.
financial
BPC's
the
This
City.
Park
close examination
of the critical partnership arrangements between the public
and
State and
how
and
private sector,
the
City of New
more
monstrous goals
the
outlined
with
each
to
reveal
form
BPC
the
understanding of
York, provides an
Authority set
out
to
Finally, the changing risks and
achieve were accomplished.
rewards
interestingly between
the
of
how a
capital
large-scale
structure
are
development
like
of whether
"the
Battery Park City is financed.
Chapter
Three answers
the question
project
revenue
the project.
of
capacity
diving into
the
determine
the
to
capital structure
the
of
intricacies
by
for whom?"
and
makes money
current
the
Meeting
project and other programs to
financial obligations of the
which the public sector is committed is an integral part of
the
analysis.
this chapter
examines
available to
the City and
State flowing
future resources
revenue stream thrown off
from the strong
With a
the
Additionally,
model of simulation
by the project.
the exact
designed to imitate
analyze the impact of varying economic
flow of funds I can
conditions on BPC's capital
My objective is to
structure.
demonstrate the strength of the project's financial success
today and its probable success in the future.
Chapter Four
financial
arrangement the
the
final
phase
City.
low-and
of
rehabilitation
a $1
of
$600
cash, in
million
questions
of its
portion
financial
alternative scenario
-
-
program
for
in
the
moderate-income units
specified annual
this
housing
billion
be funded.
rather the way it is to
pay
the BPCA committed to fund
at question, but
of the program is not
The purpose
the BPCA
State, and
City, the
In 1989,
recently agreed upon.
particularly novel
examine a
pauses to
The BPCA has agreed to
meet the
installments, to
obligation.
decision
leveraging
and
This
chapter
examines
an
funds to meet the same
monetary objectives.
Finally, in Chapter Five
question by
what funds
looking at
for what
I answer the "who benefits?"
what government entity
purpose, and who
can be
has gotten
expected to
receive
the
future.
In concluding, I will outline the potential risks,
if any, that
benefits the
project
will
lay ahead for the various
generate in
the
public and private
partners involved with the project.
By the end,
the
financial
current fiscal
workings
inner
become quite
process:
this
heralded
acclamations it has
Yorkers
clear to me
and
project
the
tremendous
its
expectations.
One
early in
deserves
received to date, and
visitors
alike
monetary rewards
venture has seemingly achieved.
10
the research
of
all
the
The view
more.
daily
see
aesthetically pleasing urban complex - by
project,
BPC
of the
objectives and monetary
fact did
New
solid understanding of
one should have a
-
-
an
is equally matched
this
public/private
CHAPTER TWO
PROCESS OF EVOLUTION
THE CAPITAL STRUCTURE: A
chapter outlines
This
time
in
examination of
is examined
sectors
were formed
the public
and private
as the risks
as well
Chart
at
stages
various
the
at
2.1
key events
illustrates the
end
sources
and
provides
a
financial
in
the
of
this
chapter
the capital
that helped shape
BPC. It also outlines
structure of the
security
close
A
the integral partnerships that
undertook
process.
evolved over
environments.
changing
to
response
the
structure of
how it
(BPC) and
City Project
Battery Park
the capital
all financings and
visualization
the
of
financial framework as it is discussed in this chapter.
The Partnership(s) Arrangement
From the earliest conceptual stages of BPC, the
politicians behind
planners and
capital structure
built upon
envisioned a
the project
two partnerships
that would
create the landfill/site and act as master developer of the
project: a public/public partnership
(the City)
and the
public/private
State of
between New York City
New York
arrangement between
(the State)
a newly
created state
Authority and any potential private developers.
sector was to
and
the
be responsible for the creation
infrastructure
while the
private
and a
The public
of the land
sector
would
undertake
the
risk
of
developing
the
commercial
and
residential components of the project.
The Battery Park City
New York
Legislature in
Authority (BPCA) created by the
1968 was
the first
action taken
towards these goals.[1] The following year the City, as the
lease with BPCA
a 99-year ground
the site, entered into
owner/landlord of
this structure, the
Under
as the tenant.
City, as owner of
the site, had significant responsibility
for
development of
planning and
the project.
The State
planned to provide financial support by lending its "moral"
on any
obligation
bonds
while the project was
Any bonds
in its non-revenue generating phase.
issued by the
and credit of
full faith
landfill
finance the
issued to
not be backed
BPCA would
by the
not absent
the State (and could
approval by a majority of voters in a state-wide election),
therefore the State's promise
would
be
moral
progressed, both
enter
private
the City
into
sector
commercial
and
newly created BPCA,
partnership
would
developers
who
residential
projects
on
accordance with the 1969 BPC Master Plan.
predominated
in this
original plan
offices that
were to
become the
success took secondary priority.
for non-prime location in the
project
anticipated that
and the State
various
the
As
legal.[2]
than
sector, acting through the
the public
would
rather
to assure any debt repayment
agreements
with
construct
the
the
in
Residential uses
while the
core of
site
commercial
BPC's financial
Small in size and planned
distant southern part of the
site, the commercial zone was considered an orphan.
At
partnerships
the
with
the
of the
developing
be
to
ability
its
on
hinged
project
all
failure of
success or
the future
revenue-producing uses,
the
were
taking
not
would
BPCA
the
Since
risks
associated with the creation
pre-development risks
land.
was
sector
public
The
evident.
initial
project's
the
point
this
into
enter
Conversely,
private sector.
the
private sector's involvement in the project depended on the
to create the enormous
BPCA's initial financial commitment
is
This
site.
large-scale
private entity to
92-acres
of new
often too
is
projects
necessary
it was
major
with
development for
for
great
Thus, in the case
digest.
land,
dilemma
cost of land
the upfront
developments as
such
common
a
often
any
of BPC, with
for the
public
risk of creating the site and
sector to assume the initial
installing the infrastructure without any definite prospect
of subsequent development.
Anticipated Lead Time
In 1972, the BPCA (the Authority) issued $200 million
bonds to fund landfill/foundation
in tax-exempt
to
provide $6
million in
funds
to repay
costs and
the State
for
advances made to the project from 1969 through 1972.[3] The
bonds
were
backed
Authority and a
future
by
the
pledge of all lease
developers.
The
obligation
general
of
the
payments derived from
State's moral
obligation to
pay
debt service if revenues from the project were insufficient
in any one year, was also required to provide the necessary
security demanded by investors.
obligated
on the
payment
made available if
would be
principal
were due
interest obligations
capitalized
to
of
$14.3
measure, a
principal
in 1980, eight
and
years after
payments
for interest
service.
meet debt
account was funded from bond
year
principal
hopefully, revenues from the project
be sufficient
security
significantly
did
first
The
targeted
interest was
until that time when,
would
unusual for
Approximately $40.5 million in
bonds.
the issuance of the
it
of
issue, thereby creating a greater
burden.
service
delayed
significant amount
however,
increase the size of the
debt
with
structured
included a
financings,
the
years of
the early
This technique was not
capitalized interest.
future
be met
were
bonds
1972
payments and
municipal
debt service could not
revenues in
lack of
the
project,
monies
Additionally, to compensate for the
from project revenues.
anticipated
that such
was explicit
bonds, it
for
appropriations
budgetary
annual
make
to
Although the State was not
debt service
million
final
As a
reserve
proceeds, enough to cover one
Additionally,
and interest.
it
was
expected that interest earned an all unused proceeds (i.e.,
capitalized
construction fund)
would also be
fund,
reserve
account,
interest
used for the
and
payment of
interest during the initial years.[4]
With this financial structure
to
cover the
bonds
could
initial development
sustain
an
8-to- 9
the State had a cushion
risks because
year
period
the 1972
before
Unfortunately, no
project-generating revenues were needed.
one would have
ever expected that it would
take more than
to see the first dollars
trickle in from
an entire decade
the project.
Problems With the Initial Plan
There were several inherent problems with the initial
structure
capital
of BPC.
the development
of
Much
was
subject to onerous and lengthy zoning regulations that only
the
delayed
bonds.
by 1981
to meet
it took
longer
to
likely revenues would not be
develop the project, the more
available
The
approvals process.
payments on
debt service
the
This fact alone increased the financial risk of the
residential development because the
be a natural extension
development,
however,
emphasized
plan
initial
the
Additionally,
State.
project was thought to
of the City southward.
Residential
a
significant
was
as
not viewed
revenue producer of real estate taxes, a key revenue source
of
it
City, while
the
was
well known
development would produce substantial
City.
Thus,
from
a
fiscal
commercial
that
tax revenues for the
perspective,
the
initial
emphasis on residential uses was suspect as the best use of
the site.
Finally, in the original plan no significant tax
incentives (tax
abatements) were contemplated as
entice private sector development on the site.
for this
are unclear,
drawing residential
however, without
15
The reasons
them the
investment downtown, to
a way to
task of
Wall Street's
the
all
was
turf,
commercial
well-established
more
difficult.
internal flaws caused dissention
In retrospect, these
between
the
State
The
the City.
and
State
its
with
substantial financial exposure was, in effect, at the mercy
of
the
the
for
marketing BPC to potential
State
desperately needed
a
tax
of
difficulty
the
developers was heightened.
1980, and
revenues by
weak
any proper
of
sector,
private
with
Coupled
lack
and the
plan
revenue-producing
incentives
process.
planning
City's
The
both the
City and State shared the potential political embarrassment
if by that
visible development.
Unfortunately, this is
market
real estate
exactly what
years as the persistence
the next ten
happened over
weak
land void of any
time all that existed was raw
added to
the mounting
of a
problems
facing the project.
Fiscal Crisis and Reformulation
The Project is Empty: From 1974 to 1979, the City and State
experienced a
and
fiscal crisis
ensuing fiscal
national recession.
for housing and
caused by
troubles,
Economic
exacerbated by
City while abnormally
hopes of the private sector
for prospective
reasonable financing
As a
result, no
private development broke
1969
and
The
1980.
a
decline curtailed the demand
office space in the
high interest rates dashed any
obtaining
a crisis
NYC's overspending
site,
landfill
16
projects.
ground between
completed in
1976,
were
future revenues
for
prospects
vacant and
remained
bleak.
In
combined with
borrowing
limited BPCA
legislation
of
construction
constituted part
housing
the
on
authorization that was passed in
of middle
development
state
other
on
dependence
project
$400 million housing
of a
of
a
The capping
the $200
to
preparation, and $85
for site
already issued
the
borrowing.
on all state agency
statutory cap
the recent
enactment
the
to
led
notes,
anticipation
by
Corporation (UDC)'s
of the Urban Development
1975 default
fund
audit conducted
thrashing
Arthur Levitt
State Comptroller
bond
a
more apparent,
becoming
State
of the
financial problems
1976, with, the
million
million for
(this
area
mortgage bond
1973 to allow the BPCA to
housing
income
agencies).[5]
without
action
This
officially ended future State commitments to the project in
the
of
form
capacity of
ceased.
as
obligation bonds
moral
the BPCA with
any form of
future
bonding
general obligation
The future of the project looked hopeless, and the
1972 bonds appeared headed for default.
"Moral" Obligation Bonds
In Danger: By the
the first principal repayment on
became evident that no income
late 1970s, as
the 1972 bonds neared, it
would be forthcoming to meet
the $14.3 million annual debt service requirement.
Default
developments
under
seemed
likely
as
potential
consideration, such as the proposed American Stock Exchange
building,
could
not
generate sufficient
revenues
in
a
fashion.
timely
with
negotiations
Additionally,
the
Housing of Urban Development (HUD) to provide insurance for
proposed residential
the first
financing of
bond
phase,
which further contributed to
Gateway Plaza, were faltering
the reality that revenues were nonexistent.
The 1972 bonds were thought to have been structured in
that
generate
sufficient
However,
by
repayment was not permissible
financing.
and
interest
Since principal
would dry up.
earnings on unused proceeds
use of a
the
capitalized
1980,
to
project
the
to support
revenues
year
the
time for
ample
provided
a manner
from bond proceeds, only the
default on the
one-year reserve fund could delay
bonds and then, only for one year.
were trading at a significant
By late 1979, the bonds
as its
credit
serious
issue.[6] Investor
hopes of
restructuring.
the
bonds
partnerships with
the likelihood
over
a
confidence was
shattered, and
saving the project
required major
to
as
whether
to
into
several-year
State having
period
was a
18
As
no
solid
evolved to date,
to support
likely
needed since the project
financial danger!
officials should
default.
the private sector had
of the
bailout plan was
go
be
should
monies
debt service or whether
appropriated for
allow
a
Significant decisions had to be made by the
Legislature
State
of the
solvency became
financial
own
State's
any realistic
the value
UDC diminished
the State's
problems of
The default
of project revenues.
discount due to the lack
the bonds
scenario.
A
was in imminent
to the
Work-Out Plan Adopted: According
Restructuring and
BPCA's own annual report, the future "...seemed hopeless in
The 1980
BPCA's creation."
after the
eleven years
1979,
report further stated, "There seemed little likelihood that
an eventual default on the bonds could be avoided, and many
BPCA could
felt the
dismal outlook
not survive."[7] This
to devise an
involved with the project
forced all parties
alternate strategy.
The resulting
changed
form
the
redefined the
reformulation of the
public/public
of the
uses of the
project.
partnership
In November
and
of 1979,
and the
Mayor of the City,
of New York, the
the Governor
capital structure
Executive Director of the BPCA entered into a Memorandum of
Understanding (M.O.U.)
which incorporated
legal principles the new
financial, and
partnership would
be the pivotal point in the
These changes were to
follow.
revised design,
capital structure as ownership
history of the
of the
through the auspices
to the State
was transferred
of the site
soon to be revived UDC.
M.O.U.
The
Agreement
Settlement
between
relations
the
provided
the
framework
Agreement)
(the
City
and
the
the
for
which
UDC.
1979
defined
The
main
initiatives of the Agreement allowed the UDC to acquire fee
interest
in
the
entire
site from
the
City
through
a
condemnation proceeding, and then to convey the site to its
wholly
owned
Corporation
subsidiary
(BPCDC).[8] In
the
Battery
1982, BPCDC
Park
Development
conveyed its
fee
interest
in
the
site
to
the
BPCA
for
a
nominal
consideration, and BPCA became both the landlord and tenant
of
the
property.
itself
twice
for
stipulated that
of
the BPCA
received,
revenues
the
detail in Chapter 3.
Finally,
Agreement
are analyzed
in
the Agreement gave the City
subject to
site in year 2000,
to reacquire the
on the
be split between
amounts
These
City.
paying
of debt service
after the payment
the
BPCA and
the right
contemplation
any revenues available would
1972 bonds,
the
In
payment of all outstanding BPCA debt.
Although the M.O.U. and Agreement provided a new legal
foundation for the capital structure, the project was still
financially
State
The
paralyzed.
was
now
primarily
responsible for the development of the site as it owned the
any
without
State had
question of
the
however,
property,
still loomed.
revenues
reformulation,
the
appropriated
State
part of
as
of
demonstration
support
financial
the
approximately
million to fulfill its moral obligation on the bonds.
public
the
Realistically,
late 1979,
in
Thus
worthiness.
bonds
bonds would impair its own future
because a default on BPC
credit
the
monetary expenditures
to substantial
to commit
repaying
$8
This
bolstered
investor confidence and prevented a default scenario.
The
appropriations
insufficient
anticipated
million
bailout
financial
over
to
continue
to meet
that
a
plan
as
long
debt service.
state
called
as
time
20
revenues
At one
appropriations
five-year
for
would
period,
state
were
time it
was
reach
$60
however,
once
revenues from the project reached a certain level, the BPCA
was obligated
to repay
plus accrued
interest.
accomplished
in
when
principal
through 1986, plus an
for any
the
advances made,
of these
Reimbursement
1986
for
$49,171,500
the State
repaid
BPCA
advanced
amounts
funds was
the
State
1980
from
additional $19,901,500 in compounded
monthly interest.
First, the Master
Two final changes occurred in 1979.
Plan was revised, and
to include
was enhanced
the
second, the City's incentive package
plan,
first master
abatements.
Master Plan
the 1979
by
development
commercial
generous tax
land
reorganizing
Unlike
emphasized
and
uses
relocating the commercial zone from the southern tip of the
site
directly across
area
to the
finally
Officials
Center.
realized
commercial development brought to
revenues
-
-
from
the World
Trade
importance
the
the project, in terms of
at this point, a primary objective.
Benefits of the New Capital Structure
The immediate benefits of the new restructuring plan
Most significantly the 1972
were numerous.
go
into default.
that neither UDC
Additionally, the
This
provision greatly
process
emphasis
that hampered
of
Agreement stipulated
nor BPCA was required to
City's zoning resolution if
commercial
bonds did not
comply with the
certain requirements were met.
reduced
the cumbersome
previous development
development
assured
approvals
efforts.
The
significant
City on
the commercial
to the
tenant payments
future as
in the
revenue streams
parcels would be
significant.
In
particular, the largest dollars would come from payments in
lieu of taxes (PILOT)(negotiated with the City) as the BPCA
and the project area are exempt from all real estate taxes.
The
site.
that
project
a
not only
second
but
developers to
the
in a
coincided
also
timely
the
to give
investors
persuaded
chance
the
was done
reformulation
Finally, the
fashion
private
draw
incentives to
necessary
provide
would
abatements
tax
offered
newly
with
an
improving local real estate economy.
A New Era Of Financial Health (the 1980)
of
Suggestions
Beginning in
Prosperity:
estate market and financial woes
$193
approximately
construction
first
of the
development.
conditional approval
buildings,
in
revenue
housing
1,712-unit project.
to
of the
Canadian-based
follow would
This was
BPC's
be the
BPCA's
developer for
Olympia
&
bonds
begin phase 1
of Gateway Plaza to
Soon
the future
1980, HUD agreed to insure
In
million
allowing the developers
With the BPCA at the
occurred that shaped
development of the project.
real
of the City turned around
development progress of the project.
key events
the
began to improve, so did the
and as these external factors
helm, several
1980
York
the commercial
(O&Y).
The
selection of O&Y in 1980, and subsequent signing in 1981 of
a master ground
lease between the BPCA
and O&Y, signified
the first bonafide public/private partnership agreement for
commercial development on the site.
It was the key turning
point in the road to success for the BPC project.
the
improvements,
infrastructure
Center (WFC).
This commercial complex was to be started in
revised
occupancy.
as
still exposed
for all
to significant
financially massive
for
significant unforeseen
in
additional interest
estimated
$1.5
Any
such a
risks by undertaking
delays
expense
six-year time
a tight
construction
in
cost increases would
for
development
billion
of
parcels, was
the commercial
project within
completion.
years
first ten
the
incentives were attractive, O&Y
Although these
master developer
table
for
commercial parcels
the
to
from the City's tax abatements
1987).[9] O&Y would benefit
on
plans
design
specific
O&Y's
in
this completion
May 1981
1985 (in
completed in
was
date
World Financial
up the
buildings making
constructed four
and
financed
O&Y
while
for
and paid
sublease arrangement,
a
land, through
1981 and
BPCA provided
public/private partnership the
In this
O&Y.
or
mean millions
Financing
the
the
WFC
of
costs
required ingenuity and unusually strong financial resources
partner.
from the
private sector
for the
WFC incorporated
estate's entry
estate
single mortgage
at the
nature
of
the
also had to be
project
and
as real
market, and real
time, represented
transactions in American
The financing strategy
phased
pioneering schemes such
into the commercial paper
loans that,
financial plan
The O&Y
the largest
lending history.
flexible, given the
the
signed
lease
with the BPCA and principal
commitments that had been made
to an
which amounted
commitments,
preleasing
because
primarily
objectives
financing
these
achieve all
able to
O&Y was
Over time,
tenants.
of the
amazing 93%
6
office space, were established long
million square feet of
before the first tenants occupied space in mid-1985.[10]
With long-term PILOT payments assured under the master
escalate annually
would
over
the
the earliest) and
of occupancy (1985 at
their certificate
first
ten years
immediate revenues
of
occupancy.
would be realized
Additionally,
as base
by the BPCA
be paid starting in 1981 at
rents were to
decreased
tax abatements
as the
These
the buildings received
commence as soon as
payments would
hand, finally
success.
financial
towards
corner
the
turned
the other
BPCA, on
arrangement, the
lease
$2 million, and
increasing annually to $17 million by year 2000.[11]
construction on the
In 1981,
designated six
development teams for a
(Rector Place).
the project
phase of
WFC began and
the BPCA
second residential
As
growing revenue
projections took on greater reality, many municipal experts
rethink their opinion
began to
bonds.
One of
the
early supporters
analyst Peter Fugiel of John
well-known
municipal bond
As early as
again, equivalent to a
the 1972
was municipal
Nuveen & Co.
bond
Incorporated, a
firm headquartered
1982, he reported to investors
1972 Bonds should be viewed
the value the
of the credit on
in Chicago.
that,
"...
the
as investment grade paper once
single A rating."[12] He recognized
O&Y lease represented as
the Canadian based
firm
lease
well
"...it
was a
into the
future.
on the 1972 bonds
meet debt service
1990s", he
the
With
1997.
for
wrote,
available to
with very substantial
coverage)
service
debt
four times
than
(more
anticipated
the early
sufficient revenues would be
appeared
revenues
"By
revenue stream
assured a
the BPCA
obligation with
binding
developer whose
credit-worthy
solid
New
of
State
York
of the project, the 1972
demonstrating its ongoing support
bonds may even warrant a higher rating in the future."
Fugiel was
the BPC
absolutely correct in his
was about
In hindsight,
occupancy
financial transformation.
to undergo a
however, he did underestimate
with which the success would
buildings in
evaluation that
Revenues began pouring
off with
being topped
the following
commence
scheduled to
payments (primarily
In 1984, the first two
come.
complex were
the WFC
the quickness
into the BPCA in the
PILOT payments).
mid-year.
form of lease
As early
as August
1986, the BPCA was financially postured to pay debt service
on the 1972 bonds from
for
advances
infrastructure
generated revenues, repay the State
made, and
needs of
appeared that the BPC had
raise
funds
for the
the project.
At this
additional
point, it
left the financial morass of the
1970s and entered a new phase of success.
Leveraging Lease Revenues
In 1986, the sufficiency of projected lease revenues
allowed
the
BPCA
to
$184,850,000
issue
25
in
Special
Obligation Bonds
improvements
infrastructure
the
for
Security
of leases,
from
revenues
of
fund
and to
$53,520,000).
(approximately
consisted
bonds
targeted set
specially
($69,073,000)
1986
1980 through
from
made
State advances
used to repay
which were
a
Sublease
the Existing
These revenues, derived
Excess Revenues (Excess Revenues).
from those commercial and residential subleases signed with
the
BPCA prior
to 1986,
funds available
were the
after
payment of debt service on the 1972 bonds and all operating
and maintenance costs of the
BPCA.
Reference to Chart 2.1
On the
demonstrates the financial priority of these funds.
Revenues, BPCA obtained municipal
strength of these Excess
insurance
bond
interest
of
the
on
provided
security and lowered the overall
investors with a triple-A
cost
which
additional security)
(as
least
at
bonds by
50
basis
points.[13]
1986
The
issue
This
significance.
support
financial help.
make
the
obligation on
had reached
repay
BPCA's
the
obligations.
capital
needs
In particular, the
painful
appropriations
the 1972
a level
State
indicated
clearly
that
the
self-sufficient state where revenues
project had reached a
could
particular
had
Bonds
Obligation
Special
bonds, and
without
State no longer had to
to
meet
fulfill
their
moral
commercial development
that provided revenues
and
external
certain
sufficient to
infrastructure
Spreading The Wealth
Utilization of "Money Machine" for NonBPC Uses: In 1986 the
New
York State
a
Program,
Legislature
moderate-income housing
amendments
BPCA
to the
dedicated
in the City of
M.O.U. and
for
low-and
New York.
Through
1979 Settlement
up to $400 million
for the housing program.
from
the
net proceeds amount
The Housing New York Corporation
to issue debt to fund
(HNYC) was created
Agreement,
streams
available revenue
any
project to support
Housing
initiative
$1 billion
ten-year
New York
passed the
the initial $400
million phase as soon as revenues from the BPC project were
on any HNYC debt.
sufficient to meet debt service
a series of complex
State, the City,
Through
public/public arrangements between the
and the BPCA, an innovative
capital structure was shaped
twist to the
that allowed surplus revenues
from the project to fund other nonBPC uses.
As before, all revenues were first directed to pay the
1972 bond obligations and operating and maintenance cost of
the
project.
Then
any
ingeniously deposited into an
first to
be used
revenues
were
Excess Revenue Fund (ERF) to
be used for leveraging purposes.
funds were
lease
remaining
In terms of priority, the
to simultaneously
repay the
State for advances made and any infrastructure needs of the
project
(this
was
accomplished
Obligation bond issue).
used as security to fund
Second,
by
the
1986
Special
remaining ERF monies were
the $400 million Housing New York
Program through the issuance of debt by HNYC. If ERF monies
the HNYC
In 1987,
(Joint
jointly decided
in tax-exempt
issued $209,995,000
funds
housing
first
the
be
This is described in detail in Chapter 3.
Purpose Monies).
bonds,
to be
BPCA's share
uses of
would
City and the BPCA respectively
divided 80%/20% between the
with
funds
of the
disbursement
a
remained,
still
rehabilitation of approximately
the
1,800 residential units in
the BPC
Revenues from
Bronx.
Manhattan (Harlem) ,and the
for
used
be
to
project in the ERF provided the primary source of security,
municipal
again,
and,
term maturities
certain
nonBPC uses
-
were used for
marked the first funds that
This bond issue
-
era of
the new
beginning to
a historic
for
credit.
enhance the
further
to
obtained
was
bond insurance
public development wealth created by the BPC project.
much
during
market
of
the
of
general strength
The
coinciding
1980s
the
scheduled occupancy of the WFC (WFC
estate
Manhattan real
with
the
1 and 3 in 1985; WFC 4
in 1986; WFC 2 in 1987/88), brought new meaning to the term
Significant surpluses
"revenues".
payments
PILOT
as
BPCA
assessments on the
the City's
several
began
agreements maximized
amended
the
Settlement
revenues
continually
the
tax
in line with
In 1989
and 1990
public/public
existing
the use of these
increased the BPCA's role in
With
because
flowing
market.
amendments to
support additional nonBPC uses.
BPCA
realized by
WFC buildings were rising
booming real estate
additional
were
surplus revenues to
First in 1989 the City and
Agreement
in
a
way
that
the New York Housing Program.
increasing,
the
Authority
anticipated surplus revenues could fund the additional $600
balance
million
billion
the $1
of
scheduled and
agreed to pay
the BPCA
After negotiations,
initiative.
housing
defined cash installments to the City from Excess Revenues,
service on all
after debt
(that is,
outstanding were
commence in
This commitment would
met).
HNYC bonds
BPCA and
1994 and end when the $600 million obligation had been met.
in
Second,
Revenue Bonds
the
City, a
-
million -
of $150
net amount
$222,660,000
sufficient
to
in
funds to
purpose of providing
for the sole
Excess Revenues
relief.
issued
the BPCA
1990,
budget
for
pay annual
debt
were pledged to the bondholders.
service on the 1990 bonds
The bond issue is subordinate to all other debt outstanding
a lien
and does
not have
project.
Only those
service on
Excess Revenues
amounts that are pledged
of the
to pay debt
provide the security
to bondholder.
rating agencies found the
revenue stream
the bonds
Remarkably, both
on the
grant an A/A- rating
on the
of the
project sufficient to
bonds.
This recent example of leveraging monies for nonBPC
several objectives.
uses accomplished
alleviated
the
need
appropriations that
current financial
to
make
politically
the City relief
would offer
problems.
For the
State monies that
State, it
difficult
from its
would have
been used for budget relief where now freed for other State
initiatives.
Additionally, the bond
for additional subordinate debt to
after all the prior obligations
issue set a precedent
be issued in the future
of BPCA and HNYC have been
met.
29
It is painfully clear that the first ten years of the
project were trying
City and
the
the State.
was in
project
of BPC
restructuring
master
and difficult times for
The
1979
and
Commercial
plan.
history of
turning point in the
and
financial
of the
project's
the legal
with
the redesign
development became
and the City relinquished its
State after
the BPCA, the
the priority
ownership of the land to the
proving its inability to
develop the property
in a timely fashion.
The commitment from O&Y in 1980/81 to
build the WFC complex
brought a financially strong private
sector partner to the
project who constructed world famous
buildings,
on
trademark.
The
schedule
with
core source of
City, and the State were
revenues would provide the
"quality"
their
becoming
BPCA, the
revenues to the
now in place and realized surplus
nucleus for funding substantial
other nonBPC public sector objectives.
With this overview of the capital formation of BPC, it
is time to
analyze the monetary viability
of the project.
A close look at the inner workings of the structure and the
sensitivity of
conditions will
the
public
the revenue stream to
help ascertain
entities
current
success
growing
economic
involved
a phase
that
revenue self-sufficiency?
holds for
what the future
in the
will
difficulties of
project, in its current form,
fluctuating economic
the
project.
soon pass
City,
Is
the
with
the
or has
the
reached a perpetual state of
CHART 2.1
CHART 2.1
CAPITAL STRUCTURE OF BPCA (1968-1990)
CAPITAL STRUCTURE OF BPCA (1968-1990)
ime Line
1968
Created
- BPCA
1969
-NYC
entered into
99-year ground
lease w/BPCA
- 1969 Master
Plan
Adopted
-NoTax
Incentives Offered
1972
1976
- BPCA
Issues
-CityEnters
"Moral" Obligation
bonds for landfill
("MOBS")
Financial Crisis
-Gov.
Carey
Limits
Borrowing
- Landfill Completed
- Nodevelopment
1979
-Concern
re:Pmt.
of MOB's
-1979 Settlement
Agreement
- State
Appropriates
monies for MOB's
-State Acquires
Fee
Interest in
Property
1979 (cont)
-City
has
Right to
Reacquire Land
in
2000
-Master Plan
Revised
(Emphasize
Commercial)
-Tax Incentives
Offered
1980
1983
1981
-HUD
Insures Gate-- Master Ground
-Severance Leases
way Plaza
signed
lease signed for
-&YSelected
Commercial Parcels
- WFC
Constr.
Begins
Il
- Residential Phase
Developers Selected
1986
1985
-WFC 1&2 -Ammendment to
Occupancy1979 Settlement
Agreement
1987
1989
HNYC issues debt -1989 A&C
Signed
-
- 1990 Budget
Obligation Bonds
Issued
Relief Bonds
issued
- Housing New York
Program Passed
Purpose
2
-
Source: Tom Oppenheim
MIT Center For Real Estate Development
to settlement
agreement
- 1986 Special
Financings
Revenue Source
1990
- Ammendment
-
Excess Revenues - After
Pint. of 1972 MOB's
- Pre
1986 Subleases
12/31/99
City has right to
reaquire Project
Site
CHAPTER THREE
LEVERAGING THE BENEFITS OF PRIVATE DEVELOPMENT
is a tremendously successful
Today, Battery Park City
project
increasing
every year.
to reach
struggle
said that the
safely be
current financial
BPC project is a
continue to produce
extent
excess dollars in the
future and what
that future economic cycles
Should
celebration, or be worried
could significantly reduce the
machine"?
the "money
benefits of
these monies?
of
magnitude
public officials continue their
monetary
"money machine"
"money machine"
be the
will
can
Will this
and State.
the City
bliss, it
going to fund other essential
with abundant surplus monies
needs of
an arduous
has been
Although it
this
continually
revenues
surplus
with
financial
How
will the
specific policy objectives established by the public sector
impacts a
any, are the
What, if
be funded?
decrease in
revenues might have on these commitments?
To answer
the BPCA over a thirty-year
potential leverage capacity of
period
given
revenue
analyzes the
these questions, this chapter
economic
various
the
stream of
scenarios
affecting
The projected
project.
the
leverage
capacity accounts for the existing financial obligations of
the BPCA
earmarked
the
and the
funding patterns
for surplus
initial
monies.
$400-million
infrastructure needs
of the
the public
These
housing
sector has
commitments include
program,
project, and the
additional
recent cash
obligation of the BPCA to fund the final $600 million phase
of
the housing
initiative.
Given
nonBPC, program objectives and
sublease payments to
the
results of
significant, primarily
the sensitivity of existing
New York tax policy
the analysis
and the economy,
should reveal
what monetary
benefits the public sector can expect in the future.
In an attempt to accurately predict the future funding
resources, the analysis will
stress tests that simulate
City
tax policy
subject the revenue stream to
varying economic conditions and
affecting
PILOT payments will
commercial
real estate.
be the primary focus
The
as these amounts
represent approximately 75% to 80% of the existing sublease
revenues.[1]
Realistic
forecasts
under No-Growth and Decline
compared to
of
projected
revenues
scenarios will be analyzed and
BPCA's current assumption that
PILOT payments
will continue to grow at 4.5% per year.
Since PILOT
of the
value of
payments are based on
the land and
building, current
policy is important to this analysis.
true in
total
light of the
rollbacks on
Because each
to appeal the tax estimate
tax assessments
City tax
This is particularly
recent downward revisions
revenue projections.
has the right
the tax assessment
to BPCA's
sublease tenant
for each parcel,
can occur annually.
If the
New York State court(s) decide favorably, taxes are revised
to
reflect the
case,
settled
Merrill Lynch
made on
result
building
2 and
In the
contended that
the basis of
of their
amount.
assessments had
optimistic income statements.
successful argument,
4 were
above-mentioned
rolled
33
As a
assessments on
back .4%
for the
been
WFC
1990-91
Evidently, the assessment did not account for
fiscal year.
unused and vacant space had on
the impact a large block of
not
did
but
adversely
however, do present
If future bond
a risk.
the BPCA's
to PILOT
Adjustments
obligations.
outstanding
financial
the
affect
the credit rating of
the BPCA or
integrity of
the
by approximately $1
in fiscal year 1990-91
revenue stream
million
adjustments reduced
These
income stream.
Merrill's
payments,
issues of the
periods when there is a drop
Authority go to market during
in assessments, the rating and interest rates on these debt
the
could reflect
obligations
PILOT payments.
of the
reduced
the cost to
BPCA of
magnitude
This would increase
borrowing funds and potentially affect the marketability of
future financings.
Finally, the
analysis estimates the amount
discretionary monies the
BPCA and City can
available for specified purposes,
scenario.
existing
financial obligations,
operating and
bonds
given a maximum leverage
and required
those annual
as
maintenance costs,
by existing
obligations pursuant
As the analysis
amounts
after the payment
to the City and BPCA
outstanding secured
Agreement.
expect to have
"Discretionary Amounts" are defined, in terms of
that are available
of
of annual
debt service
on all
sublease revenues,
to the
1979 Settlement
illustrates, these amounts are
a significant direct source of cash to the City and BPCA.
From Lease Revenues to Bonded Debt to City Coffers
has
been created
that accurately
Battery
of
structure
capital
of outstanding BPCA and
PILOT
allows
model
downward in
payments
leverage capacity
tax
or
been
HNYC bonds and
to be
of the
Flexibility
upward
adjusted
ten-year increments to determine
conditions
economic
has
BPCA and City that have
several years.
the past
It
Park City.
the various agreements between the
evolved over
current
represents the
of funds resulting from all the
designed to track the flow
legal requirements
of simulation"
A financial "model
Flow of Funds:
The BPC
would
policy
and discretionary amounts
or
how changing
affect
bond
available for
other nonBPC uses.
It is important to understand the intricacies and inner
of
workings
effectively
the current
capital
structure
the following
interpret
in order
analyses.
to
Existing
sublease revenues are derived primarily from PILOT payments
made on
the commercial (World Financial
Centers) parcels.
As mentioned, PILOT amounts represent approximately 75%-80%
of the total existing
sublease revenues with the remaining
from base
rent, retail
commercial revenues
being derived
rent and other rent
(approximately 10% of total commercial
payments).
Combined
and the Rector Place
lease payments
Gateway Plaza
residential phases supply the balance
of total existing sublease
total revenues.
on the
Thus the
revenues is derived from
revenues and approximate 15% of
breakdown of
existing sublease
85% commercial lease payments and
35
15% residential.
Annually, these total
complex maze of requirements which
revenues flow through a
the
When revenues increase or decrease, so
predetermined uses.
does
these
direction of
the
certain
directs for
automatically
capital structure
existing sublease
within the
monies
capital
structure to assure all outstanding obligations and program
objectives are met
in order of their priority.
By way of
analogy, visualize
an armored
car filled with
money that
annually
journeys
a
down
with
road
straight
numerous
unloading stops along the way toward its final destination.
BPCA and
existing sublease revenues
HNYC bonds subject to
understanding of this
To help in the
remain outstanding.
as all
as long
and predictable
remains exact
This route
the armored car takes each year
flow of funds, a route map
is provided on the following page.
The first
unloading point, or more
accurately stated
the first priority of monies, is to pay debt service on the
obligation bonds
1972 moral
Bond
approximately $14.3 million
funds
to
go
pay
administrative
these costs
this
Currently
Resolution.[2]
the
annually.
BPCA's
expenses.
1972 General
pursuant to the
In
amount
averages
After this payment,
operating/maintenance
and
budgeted amounts
for
1990,
an accurate figure
are $13.9 million,
as the
BPCA has never exceeded their budgeted amount.
All
remaining revenues
Fund, established by the
disbursement to both
funds
to each
public
then
flow to
the City
Rent
1972 General Bond Resolution, for
the City and the BPCA.
entity is
36
subject to
The split of
calculations
CHART 3.1
FLOW OF FUNDS
CHART 3.1
FLOW OF FUNDS
Other
Revenues from
Subleases
Commencing
After 1/86
Settlement
Agreement
Extra ERF
Indebtedness
-F
Residual Excess Revenue
From Subleases
Commencing Before 1/86
Sourc:e: Tom Oppenheim
MIT Center For Real Estate Development
agreed upon
in the 1986 Amended
Settlement Agreement.
is derived by taking the amounts
in the City Rent Fund and
the proportion
of PILOTs
the balance,
are remitted to the City
the
as Joint
of
approximates
PILOT
75%
Purpose
for uses that are jointly decided
Mayor, City Comptroller, and
amount
simplicity
referred to
commonly
Monies, goes to the BPCA
upon by the
The amounts
to Other Payments.
representing the PILOT proportion
and
Payments based upon
into PILOTs and Other
allocating them
It
payments
to 80%
of
remitted
the
the disbursement
the BPCA.
of
to
Since
the
City
revenues annually,
all
remaining monies
for
is
often referred to as the "80%/20%" split.
There
pattern.
debt,
the
isolates
is one
In
important caveat
contemplation of
1986
any
Amendment
revenues
the
initial 80%/20%
Revenues" (that
sum
payments
revenues
This will
point, the
Settlement
Agreement
existing
subleases
above.
payments,
leases)
City Rent
Only
1986, lump
and
are
"Other
any
future
subject to
Fund level
the
after certain
Agreement and Consent (A&C) are
be discussed
journey for
of additional
leases signed post
from new
at the
distribution
1986) and protects them from
transaction
,
from
split mentioned
obligations under the 1989
met.
the
derived
is any new
realized
80%/20% split
the issuance
to
(those leases signed prior to
to this
in detail
later.
Other Revenues ends,
At
this
however, the
existing sublease revenues are loaded back into the armored
car for a complex series of stops.
The
1986
Amendment
to
the
38
Settlement
Agreement
payment of all "Prior Claims
used for the
to be
sublease revenues are
all existing
stipulates that
and Agreed Upon
Commitments," before they are subject to the 80%/20% split.
These
advances, to
repay $69
to
used
being
obligations
finance $53 million in
bond
BPCA
all
of
payment
the
include
claims
in
million
state
infrastructure costs,
$400 million (net principal amount) of
and to secure up to
HNYC bonds issued pursuant to the Housing New York Program.
These
constitute
obligations
follow the
indebtedness, and
next unloading point -
(i)
(ii)
The 1986
additional HNYC
(iii) any
requirements,
and,
as
we
will
and
indebtedness that
the ERF
additional bond
(MBIA)
Association
Insurance
Bond
Municipal
test,
million),
($209.9 million),
bonds or ERF
limits of
within the
are issued
of priority:
Bonds ($184.8
Revenue Bonds
HNYC
service on
used to pay debt
Special Obligation
the 1987
to the
our travels
path of
the following order
indebtedness in
all ERF
(ERF)
- the Excess Revenue Fund (the ERF).
these monies are
Once there,
Fund
Excess Revenue
shortly
see,
the
1990
Resolution.
1990, through
In
an
amendment to
to include
the
1990 Budget
amendment directs revenues to pay
Amended
of "Prior Claims" was
Settlement Agreement, the definition
expanded
the 1986
Relief Bonds.
The
debt service on the 1990
bonds (Pledged Revenues) from available ERF funds after the
1986
Obligation
Special
Obligations)
bond payments
understand that,
and
1987
are met.
unlike the 1986
(Priority
HNYC
It is
important to
BPCA bonds and
the 1987
subordinate
are
and
balance
the ability
affect
could possibly
ERF
fund
to meet
debt
the
to
fluctuations
dramatic
Any
Revenues.
Pledged
by
solely
secured
debt
on the ERF
not have a lien
the 1990 bonds do
HNYC issue,
service on the 1990 bonds as these funds are directed first
to
to be
Excess Revenues
debt service on
Annual
necessary.
million from 1993
on
$51 million of
three-year period
deposited over a
service,
of debt
payment
any future
Additionally, a
was established that requires
Special Fund
forth
Resolution sets
indebtedness is issued.
HNYC or other ERF
provide
to
be met before
tests that must
certain revenue
for
the 1990
to investors,
assurances
order
in
Thus,
obligations.
Priority
if
bonds,
these 1990
is $16
the 1990 bonds
to $19.7 million
to 1997, and escalates
in 1998 when the first principal payments are due.
car and drives to their last
stuffed back into the armored
their final destination.
stop before
are
with
reunited
fulfill
that
are
Revenues)
all
to be
the
of
paid
to
in 1994
$600
City in
A&C
The
A&C.
and
Excess
must
annual
Other
cash
a new $600 million housing
has been
until the program
Total cash installments will fund the entire
million program,
$13.2 million
they
These payments, specified in the A&C, commence
and increase annually
fully funded.
the
Excess Revenues
where
1989
(both
revenues
installments for the benefit of
initiative.
The
Other Revenues
the
requirements
the
stipulates
Excess Revenues are
juncture, the balance of
At this
in 1994,
with
payments starting
increasing to
40
as low
a maximum
as
of $79.2
million in 1999.
1989
Amounts"
the BPCA as Joint
essence,
City and the
are remitted to the
remaining PILOT payments
balance remain with
In
split.
80%/20%
the
to
subject
"Discretionary
become
monies
remaining
all
A&C,
under the
have been made
cash payments
After annual
Purpose Monies.
As
can be imagined, the use of the Joint Purpose Monies is the
and heated negotiations between the
cause for many lengthy
Mayor's office, City Comptroller and BPCA.
complicated
the
ends
This
travels
of
the
Excess
of the BPC project.
Revenues and Other Revenue sources
It
should be noted that any future borrowing, such as any debt
than infrastructure costs of the
issued for purposes other
project
or to
fulfill the
$400-million housing
program,
would not constitute additional ERF indebtedness.
This new
debt
would
outstanding,
thus
be
further subordinate
Budget
1990
the
including
all
issues
Relief
bonds.
to
Additionally, since the new debt would be secured solely by
any
Excess
Revenues
Amounts), issuance
(before
they
would require
become
the mutual
Discretionary
agreement of
the Mayor, City Comptroller, BPCA, and the State.
the flow of funds, which
Now that
the financial model simulates, is
understood it is time to examine the analysis.
Modelling The flow Of Funds
General
Assumptions: This
Revenues generated
analysis considers
from Existing Subleases.
41
only Excess
These monies
represent the majority of
total annual projected funds and
quantifiable because the amount
are easily
of contractual
obligations that represent signed leases (prior to 1986) do
not
vary.
Monies
Revenues, however,
from Other
are not
closely examined because these funds to date represent more
recent
(post
residential subleases
among
depend,
transaction
fluctuating
things,
other
revenues
1986) whose
on the
from closing costs
payments (those
monies derived
individual sale
of apartment units).
Additionally, Other
Revenues can increase with the signing of future leases -
Thus, projections
course, are not predictable.
these, of
be purely speculative and extremely
of these amounts would
difficult.
As
Wakefield
Pro
derived from
Forma
Cash
(i)
constitute:
projections
tenants of
commercial
Study,
Flow
the World
payments for
Excess
Revenue
lease payments,
from
Financial Center's
four
master
Rent (base rent,
and storage/other rent), and
percentage rent, retail rent,
(ii) sublease
Cushman and
the 1990 revised
form of PILOTs, and Other
towers, in the
-
two residential
projects, the
Gateway Plaza and Rector Place.
model
The
existing debt
on
proceeds) for
million
model.
$56
expenditures.
future
million planned
of
In
According
to the BPCA,
have
been
(net
financings
and $257.4
to the
included in
these will be
42
for
addition, debt
fund obligations
in final
housing program
money
A&C obligations,
BPC's final infrastructure costs
(net proceeds)
$400-million
all outflows
service payments, the 1989
BPCA required
and other
service
incorporates
the
issued over
the next three years.[3]
The amounts available after these
integral; they represent the
obligations are fulfilled are
the BPCA's current revenue
remaining leverage potential of
monies, after
These
stream.
additional bond
passing the
test of the ERF indebtedness and 1990 Bond Resolution, MBIA
insurance requirements, and other
will
be available
and/or provide
to secure
bond covenants, are what
additional subordinate
discretionary amounts
to the City
debt
and the
BPCA.
I have assumed that the specific obligations under the
1989 A&C will be met in each year with any shortfalls being
funded
from
Other
projections of
sufficient funds
obligations in
Revenue
Preliminary
sources.
indicate that
these more variable revenues
will be available to
each year under
BPCA
fulfill the housing
All future
the 1989 A&C.
leveraged amounts are assumed to mature in thirty-years and
carry
a
tax-exempt
rate
today's
of 8.00%,
a
interest rates.
consistent
with
pattern of
existing indebtedness, interest
for three full
commencing
years with the first
in
the
fourth
outstanding.[4]
All
existing
assume earnings
at an interest
rate used by the BPCA
projections.
coverage
ratio.
must
This
the
Following
is capitalized
debt service payments
year
the
and
future
bonds
remain
reserve
rate of 5.00%,
operating/maintenance
amounts
is
funds
the actual
and its financial advisors for their
expenses of BPCA grow annually
leveraged
which
figure
meet
very
and
administrative
at 5%, and finally, all new
an
onerous
high standard
2-times
has
been
debt
an
a credit rating of A- or
attempt to insure
analysis by the rating agencies
the event potential credit
especially in light of
however, is extremely conservative,
A/A- rating from
the 1990 bonds received an
the fact that
assumption,
This
future.
in the
more stringent
becomes
better even in
Moody's and Standard and Poor's under a 1.25 times coverage
ratio.[5]
Following Cushman and Wakefield's assumption, which is
based on an historical analysis of New York tax policy, the
growth
rate in
PILOT
period
from
20-year
or
either
and
land/building
1970 through
the
actual
fact, at
example,
recession, sluggish
office
climate
vacancies
taxes
negatively
affect
assessments
rose 1.96%
on
while the tax rate grew at
this evidence,
estate,
real
For
city-wide
values, high
unfavorable
This
not
did
however,
commercial
as
In
the total
of serious
foreclosures.
commercial
for
commercial
any year.
or declining real estate
and
the
4% to 5% per year.
period
a
1970s were
the
for
declined in
the City
of
value
past two decades has
no time over the
collected by
taxes
the
a
that
concludes
rate
tax
properties has increased on average
study, covering
1989,
on
assessment
the
both
This
payments.
annual
a 4.5%
incorporates
financial analysis
Base-Case
real
estate
annually compounded
basis
6.08% on the same basis.
Given
an
a PILOT growth
rate of 4.5%
is consistent
with historical tax policy in New York.
PILOT
because
payments do
specially
not
negotiated
reach full
tax
44
value until
abatements
remain
1999
in
effect for the first ten
eleventh
the
which drops 5% per year
For
year.
assessment.[6]
payment owed to the BPCA
the tax abatement
in the initial
year.
of
value
was $15.6 million.
remain constant,
PILOT
the
However, with
only $3.9 million
The following year,
because only 67.5%
$5.1 million
exempt.
full
the
in place, the bill is
tax rates
values and
per $100 of
and the tax rate was $9.53
Therefore
1989/90
in
example,
1,156,000 square foot WFC
land/building assessment for the
1 was $164 million
on the
and a 50% exemption
the eleventh year,
remaining 4 million square footage
until
drops 7.5% per
square feet of space which
first 2 million
year until
exemption for the
abatements include a 75%
The
sublease.
years of each commercial parcel's
if the assessed
due is
the amount
value is
of the assessed
escalation continues until the
This PILOT payment
eleventh year when the full $15.6 million would be owed.
Results: A financial summary
be
The summary sheet highlights the
presented in Appendix A.
flow
of
Existing
current structure.
for the entire
amounts
in
and
Sublease Revenues
these
uses of
prioritized
complete financials
page with
the following
found on
of the Base-Case analysis can
identifies
reflected in
monies as
the
BPC's
The analysis provides aggregate figures
thirty-year period plus a
ten-year
intervals
to
breakdown of the
gain
a
better
understanding of how and when the revenues are realized and
expended.
much
The summary sheet
Excess Revenues
is designed to illustrate how
are available
45
for future
unplanned
Figure 3.2
Sumnnary of Base Case Scenario
- -
BPCA Flow of Funds Model
Years
Years
Years
Total
(2011-2020)
(2001-2010)
(1990-2000)
(1990-2020)
(Millions)
(Millions)
(Millions)
(Millions)
BREAKDOWN OF COMPONENTS
--------------------------------------------------------------------------------------$3 145.7
$2 182.2
$1 315.4
$6,643.4
Revenues From Existing Subleases....
560.3)
t709.6)
(636.9)
(1 906.7)
Current Debt Service Obligations........
(487.1)
(299.0)
(197.5)
1983.6)
O&M/Adm. Costs......................
18.1
25.6
25.0
68.7
Reserve Fund Interest...............
--------------------- ----------- ---------------------------116.5
2
199.3
1
506.0
3,821.8
Excess Revenue Fund (ERF) Amounts(1)....
(441.7)
t441.7)
(274.5)
(1,157.9)
Planned Financings Debt Service......
----------------------------------------------------------------Net Excess Applied to Settlement
1,674.8
757.6
231.5
Agreement..................................2,663.9
NEW HOUSING PROGRAM (@600 Million)
-----------------------------------------------113.8
233.1
Excess Revenues Applied (2).............
66.7
66.7
City Split Amounts (3)..................
242.6
300.2
Other Revenues Needed (4)...............
119.3
0.0
57.6
0.0
0.0
0.0
1,674.8
638.3
51.0
2,364.1
Excess Rev. Available For Leverage(5)...
FUTURE UNPLANNED LEVERAGE CAPABILITY
----------~~~~~--------------------------------411.4
433.7
368.0
1,213.1
Leveraged Amounts......................
267.4
281.9
239.2
788.5
Net Proceed Amounts(6)................
(837.3)
(298.8)
0.0
(1,136.1)
Debt Service On New Debt................
131.4
60.3
368.0
368.0
Greatest Single Year Bonding Capacity...
2013
2009
2000
2000
()(Year)
837.5
339.5
51.0
1,228.0
Excess Revenues Available For Split(7)..
DISCRETIONARY AMOUNTS
City Split (After Housing Program)
Joint Purpose Monies (Nominal Dollars)..
941.6
286.4
0.0
51.0
271.6
67.9
670.0
167.5
FUNDING SOURCES AVAIL. AFTER HSG. (PV @ 8.00%)
N/A
N/A
N/A
345.0
Leveraged Amounts.......................
N/A
N/A
N/A
209.6
City Split .............................
N/A
N/A
N/A
76.3
Joint urpose Monies....................
------------------------------------------ -----------------631.0
............................
TOTAL
------------------~~~~-----------------------------FOOTNOTES: (Please see complete financials in Appendix A)
1990-1992 and is not
(1) $51 million of this amount is deposited into the Special Fund frombecomes
Joint Purpose Monies.
available for debt service in these years. In 1993, this amount
prsuant to M.O.U and 1989 A & C.
(2) Existing sublease excess revenues applied to new hsg.theprogram
1993.
through
990
years
in
program
(3) City split amounts used to fund new hsg.
due to insufficient existing
(4) These are additional revenues needed to meet the 1989 A&C hsg. obligations
sublease revenues. Their source is new leases, transaction payments, and anticipated future revenues
from new subleases signed post 1986.
hsg. of $233.1 excess rev. plus $66.7 city split amts.
(5) Represents Excess Revenues after payment to $600 millionissuance,
capitalized interest, and reserve fund amounts.
(6) Represents 65% of bond proceeds to account for cost of
(7) Excess Revenues Available for Leveraged amouunts less new debt service on unplanned financings.
Source: Tom Oppenheim, M.I.T. Center For Real Estate Development
after
distribution amounts
and
capacity
leveraging
all
of the BPCA have been
current debt and program obligations
fulfilled.
- -
$6.7 billion
the project
monies are
of these
feet of
million square
telling how
is no
There
complex alone!
the WFC
almost
that a majority
the 6
generated from
-
this amount
To put
money or not.
it should be understood
into perspective,
sublease
the question whether
immediately answers
will make
years -
next thirty
over the
revenues realized
existing
total
of
amount
enormous
The
much more revenues will be realized from future development
as
almost
of
half
billion will be generated in
Approximately 80% of the $6.7
of the study period when
the last twenty years (2001-2020)
PILOT
Before
no
payments
funds can
approximately $2.9 billion must be
debt
obligations
Remaining
Excess
and
additional uses,
available for
be made
operating
used to pay for current
costs
of
the
project.
financings
planned
servicing
Revenues
abatements.
tax
any
reflect
longer
unoccupied.
still
are
the 92-acres
expected to be issued in the next three years (1990 through
$1.2 billion over the next
1993) will consume an estimated
thirty-years.
Excess Revenues in any
Sufficient
year are
strong enough to support all outstanding commitments.
is demonstrated by the large
Net Excess
available
time
when revenues
Therefore, it
is safe
47
in figure 3.2)
even in
ten-year interval,
period (1990-2000)
abatements.
Net Excess amounts (line item
Applied to Settlement Agreement
in any
This
the weakest
still reflect
to conclude
tax
that all
debt service payments of
current and planned
HNYC
will be
met for
the
duration they
are
priority
the
public sector
has
be
easily
the BPCA and
outstanding.
The
level of
next
established is the new $600 million housing initiative.
explained
this
earlier,
will
commitment
As
fulfilled
be
through annual cash payments
commencing in 1994 and ending
when the program has reached
the entire funding level.
To
are to
be
pay
for this
immediately directed
thirteen
Revenues,
available revenues
program, all
years.
funds include
(These
payments
demands
financial
the
specified in
can
be
found
in
1989
Excess
The
meet the
annual cash
These
contractual
A&C.
Appendix
the line
on
worksheet
available
period that it will take
sufficient to
cumulate revenues
the next
Other Revenues.)
and
amounts,
City split
13-year time frame represents the
to
monies over
from earmarked
A
in
item
the
detailed
Program
"Housing
Payments per A&C."
The summary sheet delineates
the $600-million housing initiative.
revenues used to meet
The two largest funding
Revenues,
total
respectively.
the different sources of
sources, Excess Revenues and Other
$233.1
million
By design, the
and
$300
million
first monies directed to the
program are the maximum amount of Excess Revenues available
in each year.
insufficient
At the outset in 1994,
to
meet
annual
obligations digest most of these
must
compensate for
deficient
payments
funds.
amounts
Excess Revenues are
because
existing
As a result, BPCA
by tapping
Other
that become available.
Revenue sources
significant
source
of
because they
the
represent
half
of the
-
housing commitment
total
amounts are
These
-
funding
such
and
supplemental funds are necessary to fund the A&C targets in
each year the program is outstanding (Please see Appendix A
for
the money
is
80%/20%
split provision.
under
the City
to
available
revenue
source of
The third
Revenue amounts).
annual Other
first
A&C agreement
Since the
the
to the housing program, the
directs all available revenues
traditional split is eliminated from 1994 until the program
however, $66.7
payments,
are
fund the
through 1993 to the
Although there is no contractual obligation of
initiative.
apply these
City to
to the
monies
program primarily
program, I
have
these funds available
the City will make
anticipated that
as the
split dollars
million City
the years 1990
available in
the
of A&C cash
Due to the delayed commencement
goal is met.
and has
benefits City residents
become a high priority within the Administration.[7]
the
As
is likely
program
Since
model
this
indicates,
to be
commitment
obligation the
fully funded
represents
public sector
housing
$600-million
the
the
by the
year 2003.
last
contractual
date for
has established to
BPCA surplus monies, revenues from this time forward can be
utilized
to
support
discretionary monies
initial
split
leveraged
to the
arrangement.
years (2001-2020), the model
will generate
amounts
City and
Over the
provide
and
the BPCA
under the
subsequent
twenty
predicts that the BPC project
enough excess revenues to
49
fund $788 million
in
with the
bond offerings,
from municipal
net proceeds
first feasible issuance date being as early as year 2000.
of $368 million
First, a maximum
fulfilled?
not yet been
housing program has
happen when the new
How can this
(par amount) of bonds can be issued in 2000 due to the fact
the
size
of
This means
amount of
to the
going
Revenues
Excess
Because
amount
amounts
nonBPC uses
other
expected for
be
that can
the
and discretionary
leveraging capability
of future
in
programs, the
absent large capital outlay
remaining years
amounts).
grow
continue to
will
balance of
split
BPCA as
and
City
the
can support
million (with the remaining
approximates $32.5
monies
ratio,
coverage
these Excess Revenues
debt service
Excess
year alone.
in that
$65 million
2-times debt
conservative
a
Given
would be in
date, available
by this
been met
amount to
Revenues will
first debt
that the
Second, since the housing program
the year 2004, not 2000.
will have
permits
amounts)
on these new bonds
service payment obligation
goal
leveraged
unplanned
all
bond issuance.
advanced
(calculated into
years of capitalized interest
that three
is
likely to reach significant proportions.
On
following
the
of
distribution
revenues
analysis.
generated
As
are applied
displays.
BPCA's
page, Graph
$6.7
during
billion
the
Several noteworthy
the
sublease
existing
thirty-year
mentioned, total existing
in certain order
illustrates
3.3
period
of
sublease revenues
of priority which
conclusions
the graph
can be
drawn.
First, revenues are sufficient to support the initial costs
50
Graph 3.3-Application of Revenues
Total 1990-2020 Existing Sublease Rev.'s
(Mlllions)
2500
2000
1500
1000
500
0
Current Debt
O&M Planned Debt A&C Future Debt
(Expend itures)
Total - $6.7 billion
Source! Tom Oppenhelm, MIT CRED
City
Joint Purp.
of
first to the $1.9
monies being applied
and the $983.6
debt payments
of the
Secondly,
Excess
project,
of the
costs
million in O&M costs
to support additional projected
Revenues will be available
capital
fulfill the initial $400-million
This is conveyed by
debt.
Existing sublease revenues
Only
million City split amounts
and
1990
between
necessary
The
$66.7
and
million
remaining
$300
will
come from
program
Finally, after
Revenue sources.
this
meet
to
are available during the period
2003.
fulfill the
to
initiative.
revenues
million Excess
$233
as
obligation:
that remain will then be
available
be
will
million
$300
housing commitment of the
$600-million housing
new A&C
to the
to
additional bonds
and
the bar that represents planned
BPCA.
applied
billion of current
thirty-years.
next
the
over
project
by
is reflected
This
project.
of the
costs
operating
annual
needs, and
infrastructure
land,
creating the
Other
all these obligations are
met, beginning in 2004,
Excess Revenues will be sufficient
to provide significant
leveraged amounts and Discretionary
Debt" indicates
Revenues can
The
The
bar labeled "Future
the maximum amount of
debt service Excess
City and the BPCA.
monies to the
support given a 2-times
$1.13 billion
the last 20
funds
will provide
other
nonBPC
uses.
aggregate debt
is the
$1.2 billion par
payments on
issued in
figure
debt coverage ratio.
amount of bonds that
years of this study
significant
can be
period.
These
additional resources
Finally, the
Excess Revenues in each year
service
remaining
balance
for
of
will result in $941.6 million
City split amounts and $286.4 million Joint Purpose Monies.
and Joint
the
that
revenues in
the future.
wish to focus on.
the City, State, and BPCA
stream
is
monetary initiatives
accomplish significant
sufficient to
is obvious
It
revenue
BPC's
of
status
current
of the
the financial prowess
Purp.) illustrate
existing sublease
(Future Debt, City,
bars on the graph
The last three
The Base-Case
has assumed conservative growth rates to the revenue stream
new financial requirements such as
and has imposed onerous
However, the New York real
a 2-times debt coverage ratio.
estate
market
and
Thus, it is
difficult times.
"money machine"
undergoing
currently
are
economy
necessary to ask whether the
the optimistic goals
can continue to meet
of the public sector under difficult economic times.
Testing the Sensitivity of Revenue Flows
"No-Growth"
scenarios, the
the
"Decline-Case" Assumptions:
and
Base-Case
assumptions that were
exact same
analysis
Under
only
The
apply.
these
used for
exception
is
adjustments to the growth rate of the PILOT payments.
The No-Growth scenario assumes
not increase
the commercial
in size from
parcels are
however, tax assessment of
a 3%
annual
continues to
growth
rate
increase by
allow, in effect,
that PILOT payments do
the years 2000 to
subject to
2020.
While
partial exemption,
the land/building(s) remains at
and
the
effective
1% per year.
the tax abatements to
53
tax
rate
These assumptions
be fully utilized
and the
full value
of the PILOT
before
subjecting
them
to
payments to
be realized
No-Growth
hypothesis.
a
Following Cushman and Wakefield's analysis, it is realistic
to
the
assume
City's
the
ten years of the study
commercial parcels during the first
PILOT payments are derived by
Since
period will increase.
on
assessments
tax
future
two components, the tax assessment of the land/building and
has the ability to
rate, the City
the tax
by increasing the other.
any decrease in one component
an interplay
such
Wakefield's historical
Cushman and
fact, the
instrument of the City's tax policy.
study found
variables.
the 1980s,
been the
prime
Given this convincing
negotiated
the commercial
into
already built
abatements
During
specially
the
with
combined
In
dramatically, while
rates have
tax
assessments not
evidence
these two
constant.
remained fairly
assessments
however,
between
pattern
1970s, tax rates increased
During the
compensate for
tax
subleases,
allowing the PILOT payments to reach their full value seems
to
be
a
realistic
for
assumption, even
the
No-Growth
scenario.
the Decline scenario adjusts PILOT
On the other hand,
payments
years,
finally
downward by
then
2.4% annually
assumes 0%
resumes
growth
a reduction
final ten
annually
in the
scenario
seems highly
in
during the
2001 to
from
PILOT
years of
unlikely given
first ten
2010,
payments by
the analysis.
the historical
and
2.4%
This
tax
policy of the City and economic cycles that persist in real
estate, however,
it is worth
examining to see
the impact
such a
BPC project
have on the
doomsday hypothesis would
revenues.
the
shows a
to pay
program,
plus all
Additionally, less
Excess Revenues
$600-million housing
on
is
of
any length
for
funding this portion of the
and more
uncertain
sources.
This
time
necessary
in
the
figure is $56
shifts the
in PILOT
burden
of
housing initiative to the less
variable revenues
is risky
For
in Other
a reduction
is clear:
for the
necessary.
the Decline-Case scenario the
The conclusion
million.
what is
BPCA.
result, greater
as a
scenario, $33 million
above
are
housing
of the
are available
becomes
Revenues
Other
required,
Base-Case; in
payments
initiative and
the No-Growth
example, in
Revenues
prior obligations
other
Most
scenarios,
these
mandatory $400-million
the
for
utilized
dependency
the City
reduced revenue projections.
revenues, under
generated
two
figures
of the
discretionary amounts realized by
and BPCA resulting from
the
the
of
amount of leveraging
significant reduction in the
capability and
of
results
initial review
An
analyses.
the
with
findings
Base-Case
sensitivity
following page compares
summary sheet on the
Results: The
from Other
as Other Revenue
Revenue
amounts, today,
represent a minor source of the total revenues available to
the BPCA.
Graph 3.5 (pg.58) illustrates how fluctuating Existing
Sublease Revenues will impact the program objectives of the
public sector.
sensitivity
Revisions to the
analysis
still
revenue stream in the two
produce $4.9 billion and $4.7
55
Figure 3.4
Comparison of Sensitivity Anaysis - - BPCA Flow of Funds Model
DECLINE CASE
(2.4% decrease
ten yr. cycles)
(Millions)
BREADOWN OF COMPONENTS
$4,728.4
$4,950.1
$6,643.4
Revenues From Existing Subleses....
(1 906 7)
(1 906 7)
(1 906.7)
..
Current Debt Service Obligations
(983.6)
983.6)
O&M/Adm. Costs .....................
68.7
68.7
68.7
Reserve Fund Interest...............
=---------------------------------------------------------------------1,906.8
2,128.6
3,821.8
Excess Revenue Fund (ERF) Amounts(1)....
(1,157.9)
(1,157.9)
(1,157.9)
Planned Financings Debt Service .....
----------------------------- ------------------------------------------------Net Excess Applied to Settlement
748.9
970.6
2,663.9
Agreement...........................
NEW HOUSING PROGRAM (@600 Million)
---------------------------------------------------------182.8
200.1
233.1
Excess Revenues Applied (2).............
61.1
66.7
66.7
City Split Amounts (3)..................
356.1
333.1
300.2
Other Revenues Needed (4)...............
505.0
703.8
2,364.1
Excess Rev. Available For Leverage(5)...
BASE CASE
(4.5% increase
2000 - 2020)
(Millions)
L
05~
FUTURE UNPLANNED LEVERAGE CAPABILITY
Leveraged Amounts......................
Net Proceed Amounts(6)................
Debt Service On New Debt................
Greatest Single Year Bonding Capacity...
NO GROWTH
(0% increase
1990-2020)
(Millions)
43.8
28.5
(66.2)
43.8
1,213.1
788.5
(1,136.1)
368.0
200.1
130.1
(277.7)
173.8
Excess Revenues Available For Split(7)..
DISCRETIONARY AMOUNTS
1,228.0
426.1
438.8
City Split (After Housing Program)
Joint Purpose Monies (Nominal Dollars)..
941.6
286.4
300.0
126.0
310.2
128.6
FUNDING SOURCES AVAIL. AFTER HSG. (PV @ 8.00%)
--------------------------------------------------------------79.6
345.0
Leveraged Amounts.......................
109.6
209.6
City Sp lit .............................
51.3
Monies.....................76.3
urpose
Joint
240.5
631.0
TOTAL............................
18.8
112.2
53.1
184.1
FOOTNOTES:
is not
(1)$51 million of this amount is deposited into the Special Fund from 1990-1992 andPurpose
available for debt service in these years. In 1993, this amount becomes Joint and 1989Monies.
A & C.
M.O.U
(2) Existing sublease excess revenues applied to new hsg. program prsuant to
(3) City split amounts used to fund new nsg. program in the years 990 through 1993.
due to insufficient existing
(4) These are additional revenues needed to meet the 1989 A&C hsg. obligations
sublease revenues. Their source is new leases, transaction payments, and anticipated future revenues
from new subleases signed post 1986.
excess rev. plus $66.7 city split amts.
(5) Represents Excess Revenues after payment to $600 million hsg. of $233.1
(6) Represents 65% of bond proceeds to account for cost of issuance, capitalized interest, and.reserve fund amounts.
(7) Excess Revenues Available for Leveraged amouunts less new debt service on unplanned financings.
Source: Tom Oppenheim, M.I.T. Center For real Estate Development
billion
in
total
approximately
a
$2
billion decline
in
represents
total
in
revenues,
obligations,
debt
current
fashion,
timely
a
this
period are still sufficient to
monies over the thirty-year
meet,
Although
revenues.
operating costs of the project, and planned financings that
expected
are
the
in
issued
be
to
next
three
years.
Therefore, even in the Decline scenario, revenues are still
sufficient to pay for the cost of creating of the landfill,
BPCA
commitment
to
fund
other
and
housing
under
the
timing.
As
realized
uses
nonBPC
of the
ability of
$600-million
subsequent
the
real impact
is on the
in PILOT payments
downward movement
the
The
commitment.
$400-million housing
City's
the
fulfilling
and
infrastructure,
final
Base-Case.
The
impact
first
mentioned above,
the
question
obligation, there
commitment to
close to
60% of
the cash payments
in Graph 3.6, monies from
to
amount available
in PILOT
are derived
greatly diminished
in the Base-Case.
Any
fulfilled by 2003 because
Other Revenues may not be
from this
from that
greater reduction
in a delay of
payments could result
program being
the Decline-Case
Excess Revenues that are applied
program are
the housing
greater
Graph 3.5, and more clearly
As evident in
revenue source.
is a
than 55% of the total
and in
the program,
available for
No-Growth scenario,
In the
Other Revenues.
Other Revenue sources represent more
cash
of
Excess Revenues
with less
$600-million housing
dependency on
a
is
the housing
the generation of
sufficient to meet the increased
57
Graph 3.5-Sensiti vity Analysis
Application of Existing Sublease Rev.'s
(Millions)
(1990 - 2020)
2000
1500
1000
500
0
Current Debt
O&M
Planned Debt A&C Future Debt
(Expenditures)
Base Case
Source! Tom Oppenheim,
MIT CRED
No Growth
LIII
City
Joint Prup.
Decline Case
Graph 3.6-A&C Funding From Excess Rev.
Different Funding Amts. Betwn. Scenarios
(Millions)
300
250
233.1................
..
.
..
..
...
..
..
..
..
..
...
...
..
...
..
...
.7
..
...
. ..
200
e
150
100
ea. . .... ..
=..
200.1
..... ...
e.....
.... .
182.8
eeeeeaaae a.eeae.a
.
e
. .
.
eeeae=
eeeeeaa
=.
....
...
....
...
...
....
...
....
...
...
....
...
....
..... .... .
.....
50
0
/1--7
..........
...........
..........
...........
..........
...........
..........
...........
..........
...........
..........
...........
..........
...........
..........
...........
..........
...........
..........
...........
..........
...........
..........
...........
..........
...........
...........
..........
...........
..........
...........
..........
...........
..........
...........
..........
...........
..........
...........
..........
...........
..........
...........
..........
...........
...........
..........
...........
..........
...........
...........
..........
...........
..........
...........
...........
..........
...........
..........
...........
...........
..........
...........
..........
...........
..........
...........
..........
...........
..........
...........
........... U
LVIVV,"......
A&C (1994-2003)
A&C (1994-2003)
.
A&C (1994-2003)
(Application of Excess Revenues)
Base Case
Source: Tom Oppenheim, MIT CRED
No Growth
LII Decline Case
Production of Other Revenues currently depends
shortfalls.
on
unpredictable transaction
produce
little
monies.
To a
source
in the
to
however,
to
new
the
BPCA,
increasing
meet
in PILOT payments
by a severe reduction
shortfalls caused
by
realized
funds
future leases
on
rely
pace of
signing of any new subleases
The
increase
naturally
which
of this revenue
the
dependent on
is
future
and
sublease
existing
large extent, the viability
development on the site.
would
to
relative
revenues
1986)
after
(signed
subleases
residential
those
the BPCA,
to
payments
is not a fiscally prudent policy.
the leveraging
sensitivity scenario,
either
notable is
Most
revenues.
the BPCA
truly absorb the impact of
over the subsequent years would
reduced
under
capacity and
the City and
available to
discretionary amounts
enough total
housing program
the $600-million
to meet
revenues
likely to be
there is
Second, although
of future
the amount
debt service supportable by the revenue stream in the years
2020.
2004 through
In the No-Growth
scenario, the amount
of leveraging capability is reduced to $200 million (in par
and in the Decline-Case
amount of bonds)
insignificant $43
less
debt
available
being
80%/20% split.
amounts
would
million could feasibly be
issued,
2004
after
scenario only an
are
most
of
directed
the
to
issued.
Excess
the
With
Revenues
traditional
Approximately $426 million in discretionary
be
realized
in
the
No-Growth
scenario
compared to $438 million in the Decline-Case example.
Why are these amounts greater in the Decline-Case when
generated?
less total revenues are
of
scenario as a
2004 under the Decline-Case
is issued after
result
Simply, when less debt
meet
to
streams' inability
revenue
the
the
necessary 2-times debt service coverage ratio, more becomes
the other hand, the No-Growth
On
available for the split.
reducing somewhat the
support more debt thus
scenario can
amount available as discretionary funds.
the
with
to
ability
total
scenario's
(leveraged
amounts plus
that
realized
million
raise $200
No-Growth
future
in
debt,
the
resources
funding
discretionary amounts)
the Decline-Case
under
Overall, however,
outweighs
scenario
by
$144
million in nominal dollars.
observation from the
One final
sensitivity analyses.
PILOT payments to decreasing
When subjecting
growth rates
in the early years (Decline-Case), the ability to meet debt
service payments
1993) is
for
is particularly
explain this phenomenon the
the Base-Case
1994,
This
marginal.
To
1994.
planned financings
on the
the
first
be examined
should
service
debt
(1990 through
so in
the year
complete financials
(Appendix A).
payments
(from
In
Excess
interest account) are due on
Revenues, not the capitalized
$225 million of HNYC bonds and $38 million of BPCA bonds to
be
issued in
1991 respectively.
1990 and
These planned
financings are to fulfill final infrastructure needs of the
project
and
$400-million
to
meet
housing
amounts
on
million
respectively.
the
remaining
program.
these issues
In
The
equal
$19.9
this same
61
obligation
of
1994
service
debt
million and
year, the
the
$2.98
amount of
available
revenues to
meet
a balance of only $2.6
approximates $25.6 million, leaving
available for other uses.
million in Excess Revenues
PILOT payments are reduced by
available
revenues to
revenue stream
could
obligation
debt service
The necessary debt payments can
be met, but at best, it is tight.
the
When
2.4% annually, the amount of
meet this
drops nearly $2.6 million.
payments
debt service
these
Any greater reduction in
make the
BPCA
and HNYC
bonds
issued in 1990 and 1991 vulnerable to default.
the potential default scenario
Upon further analysis,
(occurring in 1994) could be somewhat mitigated by delaying
debt service
Surprisingly, a one-year
interest for one additional year.
wait
allows
thereby
issues by capitalizing
payments on these two
Excess Revenues
grow
to
to meet
larger cushion
providing a
to $36.9
million,
a new
$25.5
million combined debt service obligation in that year (this
debt service
additional one
only $2.6
million
would be
available
planned financings in that
in
1995 after
a one-year
Thus
Instead of
year of capitalized interest).
million remaining
the payment
wait
sufficient time for
in 1994,
(due to
approximately $25.6
no
on
debt service
year) plus almost $11.5 million
of the
in large
delayed debt
debt
service.
amounts would
the revenue stream to grow
that could withstand large
to the
$2.5 million due
amount increases by
give
to a level
negative swings in PILOT growth
rates.
Despite potential aberrations in PILOT payments, the
presented analyses illustrates that the BPCA, the City, and
the
State
can
financially
scenario
look
forward to
project.
successful
and
a
the
continuation
Although
a
No-Growth
the
demonstrate
analysis
Decline-Case
a
of
sobering effect of a reduction in the revenue stream on the
monetary benefits of the project, it is unlikely that these
payments
ever
will
scenarios
nor
controls
tax
by
policy
New
can remain
York
long.
for very
posture
or negative
No-Growth
in
tax policy
Neither
fruition.
to
come
either
raising
tax
PILOT
in
The
a
City
rates
or
assessments, and this fact alone acts as a partial internal
hedge
against real
be
realistically
future
million in
purposes.
envisioned that
revenues
will
Furthermore,
only
met by
to be
net proceeds
not
support
will the
the year
an
used for
benefits,
staggering $631
expect
with
million.
reasonable
valued
other nonhousing
at 8.00%,
An amount the
certainty
and
$788
additional
discretionary amounts to
present
$1
2003, but
the City
and BPCA will exceed $1.2 billion over thirty-years.
total
can
It therefore
downturns.
initiative be
billion housing
that
estate
equate
These
to
a
public sector can
unquestionable
enthusiasm as New York enters fiscally difficult times.
CHAPTER
ALTERNATIVE
FOUR
FUNDING FOR THE $600-MILLION HOUSING COMMITMENT
This Chapter focuses on the 1989 Agreement and Consent
project to be
all available
directs
that
contract
As outlined
commitment of the BPCA.
all revenues,
A&C stipulates that
3, the 1989
in Chapter
to the new
paid in annual cash installments
$600-million housing
the
from
revenues
both existing subleases signed pre-1986 and those subleases
signed post-1986, must be used in the following manner:
to
pay
all
debt service
outstanding
to be
(those expected
planned
issued in
both
on
payments
the next
(i)
three
years) and current outstanding bond issues; (ii) to pay for
maintenance costs of the project;
the annual operating and
and
then to
(iii)
the housing program in
1994, to fund
before any monies can be
or be freed to provide
in
amounts specified by
cash commitment must
This hefty
A&C.
the 1989
installments, commencing
pay cash
be funded
used to leverage additional funds
amounts for the traditional 80%/20%
split.
Whenever available monies are used to pay cash instead
of for
Would utilizing
goals,
an immediate
question arises.
revenues to borrow funds
achieve the same
leveraging purposes
at no
significant additional
Suppose
costs?
the
1989 A&C did not exist, what level of bonds could be raised
to
fund the
borrowing
same $600-million
money versus
paying
housing objective?
cash prove
to
be a
Would
more
way to
efficient
analyzed
by
Scenario
Leverage
an Alternative
using
the
These questions are
benefits?
subsequent implications and
would be
What
the program?
fund
to
is truly the best structure
determine whether the 1989 A&C
to fund the $600-million housing commitment of the BPCA.
Counting on Borrowed Money
Assumptions and Results: The alternative analysis (Leverage
New
is
Program)
Housing
that it utilizes different
fulfill the
$600-million housing program.
(Base Case) and
Unlike the Base
Alternative Scenario.
Alternative Scenario
Charts 4.1
The
the current BPC structure
and 4.2 outline
Base-Case
funding sources to
scenario in
the new
the
than
different
Case, the
payments under the
calls for no cash
1989 A&C; instead Excess Revenues would be used to pay debt
This is an attempt to
service on newly leveraged amounts.
determine whether
support bonded
from the
amounts in
utilization
monies for funding of the
a more
efficient use
of Excess
Revenues can
cash payments
proves to
If this
Revenues
to
be the
leverage
housing program would seem to be
because the
rapidly and
funded more
of Excess
excess of annual
source.
same revenue
then
case,
the redirection
be fully
program could
monies would
be freed
for other
uses earlier.
Under
become
the
the
alternative
analysis,
source
of funding
primary
program, however, two additional sources -
65
leveraged
for
the
monies
housing
- Other Revenues
Chart 4.1
Chart 4.1
BASE CASE SCENARIO
BASE CASE SCENARIO
Pursuant To 1989
A&C Agreementommencing in1994
Until Housing Progmm
isFully Funded
L _
Source: Tom Oppenheim
MIT Center For Real Estate Development
AtTERNATIVE LEVERAGE SCENARIOChr4.
Excess
|
Revenues
Not Needed
for Housing
Until
Housing
|
Program is |
Fully
Funded
$122
million
City Split
Amounts
Source: Tom Oppenheim
MIT Center For Real Estate Development
Churt 4.2
and City
- are
Split monies -
in the
As
also utilized.
Base-Case, Other Revenues required to meet annual shortfall
provides
years are
the necessary
required in
exactly the
same in
also identical in
1993 since the
from 1990 through
both scenarios
amounts
City split amounts are
both scenarios.
obligations do not commence until 1994.
after 1994
a significant difference
This
the
comparison as
apples-to-apples
an
program.
fund the housing
also used to
amounts are
1989 A&C
There is, however,
amounts are
as these
still available under the Alternative Scenario.
A financial summary of the comparative analysis can be
Appendix
B.
program
are
both
Under
for
available
with complete
following page
on the
found
examples,
exactly
the
planned
Revenues in
monies, in
the amount
Revenues
$600-million
housing
has
changed
nothing
the
Excess
Base-Case,
$233.1 million are
pay annual cash payments in
split
Excess
debt obligations on current
Under
financings.
the amount of
as
same
existing sublease revenues nor
and
the
to
application
Net
financials in
directed to
years 1994 through 2003.
City
million, are
also
of $66.7
available in the years 1990 through 1993 as the traditional
80%/20%
split occurs
during this
Finally,
time period.
Other Revenues in the amount of $300.2 million, fulfill the
monetary shortfalls in
each of the years
between 1994 and
2003.
The Alternative
funding
approach.
annual cash
Scenario, however, takes
Excess
payments but
Revenues are
are leveraged
68
a different
not used
to provide
to make
a new
Figure 4.3
COMPARI TIVE ANALYSIS
WITH A&C VS. WITHOUT A&C
BASE SCENARIO
(With A&C)
BREAKDOWN OF COMPONENTS
ALTERNATIVE SCENARIO
(W/out A&C)
lotat
(1990-2020)
(Millions)
Tears
1990-2020
(Millions)
$6,643.4
9067)
983.6)
68.7
$6643.4
(1 9067)
9836)
68.7
Excess Revenue Fund (ERF) Amounts (1).....
3821.8
157.9)
Planned Financings Debt Service ......
Net Excess Applied to Settlement
Agreement.....................................2,663.9
NEW HOUSING PROGRAM (@($600 Million)
3821.8
157.9)
Excess Revenues Applied (2).....................
233.1
City Sit Amounts (3)6.....................866.7
Other Revenues Needed (4).......................
300.2
Leveraged Amounts ............
0
0.0
122.7
238.1
239.2
Revenues From Existing Subleases....
Current Debt Service Obligations ............
O&M/Adm. Costs ......................
Reserve Fund Interest ...............
Year Hsg. Program Achieved
FREED MONIES DUE TO ALTERNATIVE SCENARIO
2003
Excess Revenues (2000-2003) (5).............
City Split Amounts(2000-2003) (6)..........
Other Revenues (20 0-2003) 7...............
n/a
Joint Purpose Monies (1994- 20).
;::::::
....... n/a
Total Freed Monies.....................
Freed Monies PV
8.00%) ...............
.n/a
67n/a
Excess Rev. Available for New Leverage (8)
0
0
2,364.1
FUTURE UNPLANNED LEVERAGE CAPABILITY
Leveraged Amounts ...200-203)(...................1,213.1
Net Proceed Amounts(9)
na 788.55..............
Debt Service on New Debt (10)...............
(1,136.1)
Greatest Single Year Bonding Capacity.......
0
(Year)
2000
Excess Revenues Available For Split
vrg(8..
1,228.0
2,663.9
2000
18.5
31.4
62.1
21.0
133.0
56.7
2,541.2
1,213.1
62.1
13259.9)
131.4
2013
1,281.3
Discretionary Amounts
City Split (After Housing Contribution).....
Joint Purpose Monies (Nominal Dollars) ....
941.6
286.4
FOOTNOTES (please see next page)
Source: Tom Oppenheim, M.I.T. Center For Real Estate Development
973.0
308.3
FOOTNOTES
(1) $51 million of this amount is deposited into the Special Fund from 1990-1992 and is not
available for debt service in these years. In 1993, this amount becomes Joint Purpose Monies.
(2) Net excess revenues applied to the 1989 A reement and Consent ("A&C") for new hsg. program. In the case of leveraged
scenerio no excess revenues are paid to A&C and go for the purpose of leveraging monies and city split amounts.
(3) City split amounts used to fund new hsg. program. These amounts are approximately $56 million more under leveraged scenario
as result of their availability from 1994-20 03.
(4) These are additional revenues needed to meet the A&C hsg. obligations due to insufficient existing
sublease revenues. Their source is new Leases, transaction payments and anticipated future revenues
from subleases signed post 1986. The Leveraged scenario amount a (ies the same amount of Other Revenues
per year as the Base Case. The difference is a result of the earlier fulfillment of the hsg. program by 3 years
under the Alternative Leverage Scenario.
(5) Excess Revenues are directed to provide security for new leveraged amounts and remaining monies go as city split monies
to the housing program. As a result of early fulfillment of housing program under leveraged scenario, 18.5 million
are freed for other non-BPC purposes in the year 2003.
(6) This amount represents those City split amounts that are freed for other uses in the years 2001 and 2002. For these two
years the freed amount is approximately $40 million, however, $8.9 million is netted out to represent the amount
of greater City split amounts under the Base Case in the year 2003.
(7) Other Revenues freed from the period of 2000 through 2003.
(8) Represents Excess Revenues available for future unplanned leveraged amounts. Figure derived from taking Excess Revenues
applied to the Settlement Agreement less those amounts applied to the new housing program (City split amounts plus Excess Revenues).
(9) Represents 65% of bond proceeds to account for cost of issuance, capitalized interest, and reserve fund amounts.
(10) Debt service amount greater for leverage scenario due to amounts issued to fund housing program.
source of
amounts
represent the
These bonded
in debt.
$239.2 million
funding
can
Excess Revenues
maximum level
support and act as the substitute for cash payments made to
the
program
housing
under
There is a marked increase of $56
when they are available.
as
result
direct
a
leveraging purposes.
1994 Excess
of
Since
split
City
henceforth.
annual
debt,
in
amounts
cash
commencing in
a 2-times debt
Excess Revenues
years
the
source utilized
These
Revenues.
for
available Excess
in each year to meet
new
Revenues
the traditional
of the
only half
final funding
The
in Other
million
exact
on the
ratio
provide
Excess
Unlike the Base-Case,
Revenues are required
coverage
utilizing
Revenues remain available for
split.
80%/20%
the Base-Case)
$66.7 million applied under
Scenario minus
Alternative
the
under
available
million
($122
million
split
annual basis
on an
to the program
also paid
amounts are
City
Base-Case.
the
1994
still
and
is $238.1
amounts represent
the
under
the
required
disbursements
Base-Case, however the total amount is reduced due to early
fulfillment of
Scenario.
the housing
program under
Thus less aggregate
the Alternative
monies are needed from this
revenue source.
Overall, the Alternative Scenario
proves to be a much
more efficient method of funding the new housing program as
the $600-million commitment is met in the year 2000.
4.4
shows the
program
under
cumulative funding
each
scenario.
pattern of
As
Graph
the housing
illustrated,
the
Alternative Scenario achieves the new housing program three
Graph 4.4-Funding $600 Million Hsg.Prgm
Paying Cash Versus Leveraged Monies
(Millions)
700
600
500
400
300
200
100
0 TF
1990
F91
92
93
94
95
Base Case (Cash)
Source: Tom Oppenhelm, MIT CRED
96 97
(Year)
98
99
0
1
I Alt. Case (Leverage)
2
2003
same amount of
provide the
years
through
1990
The
identical.
This can
1993
difference
is
the
split
amounts
are
rapid
fashion
the
program from
$239 million
to leverage
utilized
City
as
attributed to
be
in the
funding to the program
funds the
Alternative Scenario
2000.
The two scenarios
in an expedited fashion.
years earlier
1994 through
being
Excess Revenues
of new
debt plus
the
availability of greater City split amounts in those years.
of
the
sources
funding
demonstrated in
the graph,
and in
million)
applied to
first three
debt
years 1994
each year.
through 1999
Revenues are
service
current
on
amounts
1989 A&C
Heavy dependency on Other Revenues is necessary
requirements in
Excess
is funded
1994 through
specified in the
the exact amounts
As
years ($66.7
The total
in the years
as Excess Revenues are insufficient
the
Case.
depends solely
Revenues.
the housing program
2003 reflect
agreement.
Other
Base
the housing program
subsequent years
the
Revenues and
Excess
the
under
in the
split amounts
with City
illustrates the breakdown
chart in Graph 4.5
The bar
This is
as the
almost entirely
payments
on
bond obligations.
all
to meet the large cash
especially evident in
amount of
depleted in
outstanding
As existing
available
meeting
planned
and
sublease payments
become stronger each year with growing PILOT payments, more
Excess Revenues
become available to fund
the program.
By
2003, only $18.5 million is needed to meet the $600-million
housing commitment and this can
Revenues.
be funded solely by Excess
Graph 4.5-Base Case Scenario
Paying Cash to Fund Housing Program
(Millions)
100
80
60
40
20
0
1990 91
92
93
94
95
96
97
98
99
00
01
02 2003
(Year)
Excess Revenues
Source! Tom Oppenheim, MIT CRED
City Split Amts.
ELI] Other
Revenues
4.6 directs
in Graph
Scenario shown
The Alternative
the same $66.7 million in City split amounts to the housing
in
picture
dramatically changes.
the
years,
remaining
amount
applied are exactly the same
funding
Revenues will support new debt
however,
the
as in
the
this year,
Revenue
sources
as in the Base-Case.
The new
of
Other
scenario, leveraged
provide the nucleus for the
In 1994,
the program.
funding
timing for
In
under this
sources available
amounts and City split monies,
rapid
1994,
In
years.
three
first
program
in the net principal amount
of approximately $68 million for the program.
the
under
period the
the
entire
housing commitment remains outstanding.
It is
payments that
not
until
This is
split
are available
for
than compensated,
are
the same
It is
from Excess Revenues.
available
amount of
the
in
form
of
can support new
exceed those amounts that
more
cash
amount of
the
Excess Revenues,
that
amounts that
Scenario plus
amounts exceed
debt
1999
available cash,
debt.
available
of funding
amounts
Scenario persist
Alternative
that new
clear
year under the
$13.2 million in the same
Greater annual
Base-Case.
Thus a total
directed to the housing initiative
of $81.1 million can be
compared to only
Excess
however, by
under the
Alternative
Other Revenues
year (total funds equal $84.3 million vs.
City
in that
$79.2 million in
1999).
As a result of fulfilling the housing program by 2000,
significant monies
are "freed" (after the
payment of debt
service on the new housing bonds) for other nonBPC purposes
75
Graph 4.6-Alternative Scenario
Leveraging Monies To Fund Hsg. Program
(Millions)
100 -11
87.5
81.1
....
76w3.
7.4 ..........
...
........
7 3...
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..
..
..
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..
..
..
*.
..
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........... .
...
...
..
...
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..
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......*... .......
... .....
8058.7
604025.2
15.8
20
0
84.3
.15.5
I
I
1990 91
..........
92
93
94
95
I
96
97
98
99
I
00
01
02 2003
(Year)
Leveraged Amounts
Source! Tom Oppenheim, MIT CRED
City Split Amts.
Other Revenues
in
monies
In the
presented.
dollars are
Revenue
from
realized
are
that
needed in
are
Other
Scenario.
realized from 1994
2003, because housing obligations
From 2001 through
represent those
been fulfilled, freed monies
have already
2003
first "freed" monies for other
through 2003, represent the
uses.
the Alternative
plus Joint Purpose Monies
This amount,
early
million fewer
2000, $4.5
year
through
1994
of
Joint Purpose
Additionally,
program.
of the
fulfillment
a result
as
2003
through
years 2000
the
of freed monies
4.7 illustrates the amount
Graph
sooner.
amounts that are still necessary to meet the program in the
amount
is equal
$18.9 million
the Base-Case
in City split amounts
traditional 80%/20%
from the
$31.7 million
to approximately
applied under
Revenues
plus an
City split amounts
the Alternative
split under
the Base-Case
can not
be viewed
$32.6
split
City
versus $23.7
under
this is the result of debt
debt that was incurred to
applied under
aggregate amount
because fewer City
in that year under
million
as the
nonBPC purposes.
$8.9 million
are available
In 2003, however,
in Excess Revenues
freed for other
reduced by
freed for other
and Other Revenues are
$18.5 million
the final
Base-Case
additional
that become available
purposes in the amount of $47.2 million.
(i.e.,
in Other
The same phenomenon occurs in 2002 as additional
Scenario.
that is
In 2001, this
years under the Base-Case.
remaining three
This
amount is
split amounts
the Alternative Scenario
amounts
in
the Alternative
2003
for
Scenario);
service payments due on the new
fund the housing program.
77
Since
Graph 4.7-Freed Monies Due To Leveraging
From Year 1994 to 2003
(Millions)
160
140
120
100
80
60
40
20
0
-20
1994-2003
2000
2002
2001
2003
(Year)
LIZl
Excess Revenue
City Split Amounts
Other Revenues
Joint Purpose Monies
Source: Tom Oppenheim, MIT CRED
Total
no new bonds were issued to fund the program under the
Base-Case, City split amounts are greater in 2003.
Additionally, Joint Purpose Monies
of $21 million are
realized under
the Alternative Scenario from
2003
not available
that are
again is the
under the
result of Excess Revenues
1994 through
Base Case.
This
not going directly
to pay cash to the housing initiative but rather to support
new
split
debt. 'This
between the
allows monies
City and
on an
the BPCA
annual basis
under the
to be
original
terms of the Settlement Agreement.
Conclusions and Recommendations
The benefits of leveraging Excess Revenues to provide a
new funding source for
Issuance of debt
the housing program are convincing.
early and the availability
monies can be utilized to
the
$600-million housing
of City split
rapidly meet the requirements of
program.
Excess
Revenues, City
split amounts, Other Revenues, and Joint Purpose Monies are
maximized to
uses
free monies earlier ($133
the public
million) for other
to address.
sector wishes
Although the
timing of the program being fully funded by 2000 is subject
to fluctuating PILOT payments, the reduced cash payments on
an annual
basis under
pressure on
the revenue
the Alternative Scenario
flow of
the project.
puts less
This will
help mitigate any negative impact variations to the revenue
stream will have on the funding of the housing program.
The benefits
are so numerous
79
that one has
to wonder
why the City insists on all available revenues going to pay
the state striving
participants in
from
(present
million
represented
8.00%
at
value
in graph
monies
freed
all
other
used for
The question becomes whether
delaying
worth
is
revenues
of
of
$56.7
revenues is
could be
4.7) that
nonhousing purposes earlier.
protection
freed
of the
dollars
in 1990
for housing
In other terms, the
purposes over a longer period of time.
value,
protecting future
of money
the payment
political
a
From
is reasonable, however,
is stretching
of the
to get a share
machine".
"money
the
standpoint this
revenues
other cash hungry
has immunized itself from
A&C, the City
benefits
cash payments through the 1989
By assuring
are political.
The most obvious reasons
program.
cash to the new housing
significant
amounts for other public purpose objectives?
fulfillment
payments
revenue flows of
those
amounts
necessary
to
following
fulfill
the
to the
Other
the
80
sources
the
on
the
payment schedule
and
schedule
existing obligations under
A&C:[1]
from
under
The
new
Revenue
program
housing
Scenario.
page delineates
compares them
the
reflect
program
schedule should equal
The new
the BPCA.
that
housing
new
the
under
Leverage
Alternative
schedule of annual
to require a reduced
required
other
An amendment to the 1989 A&C
public entities in the State.
should be drafted
significant
streams from
revenue
future
and protects
monies,
frees
program,
housing
the
of
early
achieves
recommendation
following
The
the 1989
Year
Recommended Schedule
Current Schedule
1994
$10,545,415
$13,200,000
1995
24,283,108
26,400,000
1996
31,836,021
39,600,000
1997
39,101,167
52,800,000
1998
47,285,074
66,000,000
1999
51,545,892
79,200,000
2000
33,494,619
79,200,000
2001
0
79,200,000
2002
0
79,200,000
2003
0
18,487,185
The
freed Excess
issue debt under the HNYC.
stipulate that
to HNYC
in the
This amount
capacity that
Excess Revenues
ratio
in
to
pass additional
net proceeds
amount of
represents the maximum leverage
$239 million.
coverage
be utilized
The amended A&C Agreement would
the State Legislature must
bonding authority
debt
can then
Revenues
can support with
years
the
1994
through
amended A&C
City split monies
to fund the new housing
2000.
all available
would direct
Additionally, the
a 2-times
program as long
as the cumulative balance was less than $600 million.
This
recommended structure
81
accomplishes
all of
the
desired goals
of the
City by
revenues for the new housing
is funded, however, is
payments
are reduced
assuring the
program.
different.
to a
The way the program
Inefficient annual cash
minimum and
becomes the new source of capital.
dedication of
leveraging monies
Protection of monies to
fund the program are assured by the new A&C, and tremendous
amounts
of money
are
thus relinquished
nonhousing uses to the public sector.
BPCA,
the
City,
and
the State
alternative structure to fund
initiative.
early for
other
I recommend that the
strongly
consider
this
the new $600-million housing
CHAPTER FIVE
CONCLUSIONS AND SPECULATION
today,
flow.
insufficient cash
the
BPCA, the
this
Although
State on
City, and
the
has
always
not
been
is
commercial and
Revenues from the
of monies to
channel a healthy flow
residential subleases
have
not
does
BPC project
the
problem
one
developments
estate
real
large-scale
many
Unlike
an annual
basis.
case,
recent
the
activities funded by the "Excess Revenues" give new meaning
to that
financing the infrastructure
term: in addition to
excess revenues have
amenities of the project,
and public
initiatives established
city-wide policy
underwritten
by
the Authority and the Mayor's office.
In the early stages
of the project, financial support
to create the initial 92-acre
from the State was necessary
obligation
original 1972
bonds.
project
from
rewrote
its
In 1979 several
BPCA
future.
financial
residential
with
deal
events recast BPC's
the
switched
to
emphasis
the
City
provided
and
Authority
of
the
use,
commercial
the
on the
from defaulting
the Authority
to keep
its moral
forced to honor
the State was
financial snags,
serious
hit
and
stalled
project
the
When
landfill.
much-needed incentives to attract private developers to the
income-producing
conditions
in
dramatically.
commercial
Manhattan's
Monies
sites,
real
and,
estate
market
finally started to flow
83
fortuitously,
improved
to the BPCA
as
matured and,
development
officials
public
to fund
City's ten-year
the
particular,
purposes, in
nonBPC
World
four
all
be harnessed
monies could
that surplus
realized
to the
its debt
1980s, with
for occupancy,
open
Centers
Financial
late
the
By
development.
reached
fund infrastructure
raise additional capital to
State and
they had
1986,
BPCA to repay
for the
levels sufficient
by
$1
billion housing initiative and City budget relief.
How these
structure.
commitments
open
anticipated funds
the next 30
pure
by
Authority and
and who will
years from the project's
speculation.
however, puts the
BPC's
the
success as
City in the enviable
has
existing
today's
City.
how
Determining
question.
will be used
and who
sure to materialize
the new revenues
an
is
is reflected
the
between
happens with
future
them
from
benefitted
been used
funds have
long-term
BPC's capital
of the
the cornerstone
has been
subleases
from their
leverage funds
ability to
The
What
in the
these
benefit over
financial bonanza is
developer,
a public
position of having
the revenues with which to make such choices.
Who Benefits
A summary of
occurred
bond
to date
is presented
financings have
starting with
most
the sources and uses of
recently
been the
the 1972-moral
with
in Figure
funds that have
5.1.
Municipal
primary source
of capital
obligation bonds
and ending
the 1990-budget
84
relief
transaction.
Figure 5.1
Sources and Uses Of Bonds Issued By BPCA/HNYC 1972-1990
(Millions)
------------------------ ~~----------------------------------PERCENT
BOND PROCEEDS
SOURCES:
------------------------------------------------------------------ ---------------------------1972 Moral Oblig. Bds.
1986 Special Oblig. Bds.
Series 1
Series 2
Series A
$200.0
24.46%
103.9
46.7
34.3
12.71%
5.71%
4.20%
210.0
25.69%
222.7
817.5
27.24%
100.00%
1987 HNYC Revenue Bds.
1990 BPCA Rev. Bds.
TOTAL:
OTHER NON
$400 MILLION
BPCA PROJECT REPAYMENT OF
COSTS OF
TOTAL
BPCA USES
STATE ADVANCES HOUSING PROGRAM---------------------------COSTS
ISSUANCE
USES:
-----------------------------------------------------------------1972 Moral Oblig. Bds.
Net Proceeds
Capitalized Interest
14.3
Debt Service Reserve
Fees
03
Un
$135.8
40.6
3.3
-
35.1
-
-
-
7.9
-
1986 Special Oblig. Bds.
Net Proceeds
Capitalized Interest
15.8
Debt Service Reserve
Insurance Premium
Fees
1987 HNYC Revenue Bonds
Net Proceeds
Capitalized Interest
-
Debt Service Reserve
Insurance Premium
Fees
3.5
-
41.1
-
53.5
Fees
Original Issue Discoun
Other Costs
TOTAL:
69.1
-8-
-
-
-
-
-
-
142.6
-
3.0
-
-
-
~
-
-
--
-
-
12.7
-
-
0.8
-
-
260.5
210.0
-
-
37.0
20.0
2.2
184.9
-
--
-
$200.0
-
-
-
1990 BPCA Revenue Bds.
Net Proceeds
Capitalized Interest
Debt Service Reserve
-0-
-
21.1
0.8
0.2
1.2
Original Issue Discoun
Other Costs
$6.0
-
189.4
-
-
-
75.1
222.7
150.0
-
-
142.6
17.44%
9.18%
23.16%
31.86%
PERCENT:
1990.
through
1972
from
Statements
Official
Footnote: Figures derived from all BPCA and HNYC
Source: Tom Oppenheim, M.I.T. Center For Real Estate Development
150.0
817.5
18.35%
100.00%
Since 1972, bonds issued by the BPCA and HNYC have exceeded
million.
$817
over
formulated by
past several years, these funds
million, which were used to
issue additional bonds, $185.8
signified an important turning point
to the capital market
of
could be
subsequent financings
control,
"basics" under
the
With
BPC project.
the
That trip
the project.
additional infrastructure costs of
fund
and to
bailout assistance
for its
the State
repay
BPCA to
for the
revenues available
were sufficient
1986
Not until
of the project.
pre-development costs
for the
have been used for several
proceeds went solely to pay
Initially, the bond
purposes.
over the
State, and the BPCA
the City, the
agenda
a prioritized
with
line
In
other nonBPC
used to fund
purposes.
In 1986
public wants.
up to
1986 the newly
and in
revenue bonds
housing
The second
revenues.
relief -
BPC's
- was a
revenues.
in
1990
these bonds
an
BPC's existing
strength of
on the
item on
-
the list
avoid
Hoping to
-
City budget
demand on
in
revenue
of BPC's
need to
the BPCA,
capital
on
to
Although
priority or
it demonstrated
structure.
86
issued
City.
a new layer of
call
BPCA, and
bonds were
funds to the
did not represent
of
the
negotiated with the
million in net
ongoing commitment
flexibility
million in
unique, though unanticipated,
$223 million
provide $150
city-wide housing,
formed HNYC issued $209
funds, the City
Albany for
to guarantee
the Authority agreed
(net proceeds) for
$400 million
nonBPC
list of
the
item on
first
was the
Housing
In this
the
case,
of
Revenues were temporarily
Excess
redirected from the $400-million
one time budget need
to fund this
housing program
thus
and
public initiatives,
nonBPC
other
priority
should take
(hopefully temporary)
the City
over
the financial perils
City officials agreed that
State and
of the
City.
million, or
$189
$817 million
of the
Out
used for
been
actual
percent) can
$75 million (9
an additional
project costs;
proceeds, only
in bond
percent, has
23
raised to
necessary to fund the project
date beyond the small amount
itself.
overall
project's
amount of money
is the large
financial success
the
of
measure
striking
One
be considered project costs since these monies were used to
on the 1972 bonds.
of
PILOTs
for total project costs.
all these bonds
-
$260
-
lead time before projects
meant large
the
for
the
used
million ($189 million
million compared to $264
lot to issue
the long
Monies
to cover
housing initiative and budget relief
benefit of the City's
plus $75 million)
pay debt service
percent) or
(36
percent).
(32
issuance
total $292
initial
A majority of the monies, however, have
nonBPC uses
to fund
costs
fund the
to
infrastructure work plus to
landfill and
gone
advances made
for
the State
repay
amounts of
necessary to fund debt
It
million -
has cost a
- because
would start generating
capitalized interest
were
service during the nonrevenue phase
of the project.
In Chapter
project's
3, the Base-Case analysis
capacity
to
support
87
illustrates the
significant
capital
in the
expenditures
sources and
uses of
next thirty
years.
over
the
next
million in
future.
funds that can
The
three
years
include
will go towards fulfilling
obligation to
the City
financing plans
approximately
$511
and $93
million HNYC debt
in terms of net
the
over the
be expected
BPCA's immediate
bond proceeds ($417
million BPCA debt);
5.2 summarizes
Figure
amounts, $257 million
the BPCA's $400-million housing
and $56 million
will pay
for the
remaining infrastructure needs of the project.
As revenues
time, three
Revenues,
from the
project continue to
funds -
sources of
and Unplanned
ways.
around $1.5
First, pursuant
annual
cash
Excess
-
Financings
primary funding source of
Revenues,
-
-
Revenues, Other
will become
all future policy goals.
billion, will
to the
installments
1989 A&C,
for
in 1994
Revenues,
million.
Other
subleases
signed
$600-million
These payments
totalling
$300
funding
years.
million
for the
for additional
over $299.8
monies
and
will
Once all project costs
be used
in 2003, total
available
transaction
provide
housing program
$1-billion housing
then
new housing
those
post-1986
the
over the
from
payments,
additional
next 10
to 13
have been met and the total
program fulfilled, Excess
for two
fund
until the
and continuing
been fulfilled
obligation has
several
they will
BPCA's
the
Excess
be utilized
commitment to the New York Housing Program.
commencing
mount over
purposes:
(i)
unplanned leveraged
Revenues can
to provide
security
amounts, and
(ii) for
the 80%/20% split between the City and the BPCA.
Unplanned
Figure 5.2
Future Sources and Uses Of Funds, BPCA, 1990-2020
(Millions)
---------------------------------------------------- -----------------------PERCENT
TOTAL
CASH
BOND PROCEEDS
SOURCES:
-------------------------------------------------------------------------- -----------------------------------------------Planned
1990
1991
1992
1993
HNYC Debt
Issue
Issue
Issue
Issue
Planned BPCA Debt
1991 Issue
1992 Issue
Excess Revenues (1)
(1990-2020)
Other Revenues (2)
(1994-2003)
Unplanned Bonding Potential
Max Leveraging (3)
TOTAL:
00
k
$227.1
84.4
59.2
46.9
-
37.6
55.9
-
$417.6
11.76%
93.5
2.63%
-
-
1,527.8
1,527.8
43.01%
-
300.2
300.2
8.45%
34.15%
1,213.1
1,213.1
===------------------------------------------------------------------100.00%
3,552.2
1,828.0
1,724.2
ASSUMED
JOINT PURPOSE
CITY SPLIT
OTHER NON
$600 MILLION
$400 MILLION
BPCA PROJECT
COSTS OF
TOTAL
MONIES
MONIES
BPCA USES
HOUSING PROGRAM HOUSING PROGRAM
COSTS
ISSUANCE
USES:
--------------------------------------------------------------------------------------------------------------------------Planned HNYC Debt
$87.1
1990 Issue
1991 Issue
1992 Issue
1993 Issue
32.4
22.7
18.0
Planned BPCA Debt
1991 Issue
1992 Issue
15.1
22.4
22.5
33.5
Excess Revenues (4)
(1990-2020)
--
-
Other Revenues
(1994-2003)
-
-
Unplanned Financings
-
Max Leveraging
TOTALS:
PERCENT:
$417.6
$140.0
52.0
36.5
28.9
-
93.5
-
-
941.6
299.8
286.4
1,527.8
-
4
424.6
622.3
17.52%
300.2
300.2
-
-
-
-
56.0
1.58%
(Footnotes on following page)
Source: Tom Oppenheim, M.I.T. Center For Real Estate Development
257.4
7.25%
600.0
16.89%
788.5
22.20%
1,213.1
---
788.5
941.6
26.51%
286.4
8.06%
3,552.2
100.00%
FOOTNOTES
(1) Revenues available from pre-1986 subleases after debt service on planned and unplanned
financings and annual operating/maintenance costs.
(2) Revenues from post-1986 leases that are necessary to fulfill $600 million housing program.
from 1994 through 2002.
(3) Financings after the $600 million housing program is fulfilled. Leveraged proceeds available
for non-BPCA uses.
in City split amounts that
(4) Includes $233.1 million in excess revenues and $66.7 million
are used to fund $600 million housing program in the years 1990 through 2003.
(5) All information is derived from Appendix A, Base Case Scenario
0
- -
Complete Financials.
financings could
yield $788 million in
the next thirty years for any
upon.
Direct
cash
approximate $1.3
use the City and State agree
the
to
net proceeds over
City
and
billion as City split
the
BPCA
could
amounts will reach
$941 million and Joint Purpose monies, $286 million.
The magnitude of these
of
the
"money
machine".
revenues from the
be,
a solid
nucleus for
From the
As
Figure
project have been, and
cash for not only the
goals.
figures indicates the strength
5.3
shows,
the
will continue to
leveraging monies
and providing
project but also other public-sector
start of the project in
1968 until 2020,
total net funding resources will have totalled a staggering
$4.4 billion.
With the exception
Other Revenues needed to
of
these monies
will
on
the
million in
fund the housing initiative, most
come from
and residential sublease
development
of the $300
the existing
revenues.
site
commercial
Furthermore, if future
proves
successful,
the
total
resources will grow exponentially
as new sublease revenues
would add
capability and
significant leveraging
increase in
cash disbursements (Discretionary
a marked
Amounts) to
the City and the BPCA.
Who benefits from this enormous funding source the BPC
project has become?
will continue
to be
next several years.
the
funding
It appears
that the City has been and
the main recipient
of funds
for the
Graph 5.4, indicates who benefits from
patterns
to
date and
in
the
future.
illustrated, the City has received $150 million for
91
As
budget
Figure 5.3
Combined Current and Future Sources and Uses of BPCA Funds, 1972-2020
(Millions)
-----------------------------------------------------------------------------------------------PERCENT
TOTAL
CASH
PROCEEDS
SOURCES:
---------------------------------------------------------------------------------------------------------------------------------------------------13.90%
$607.5
$607.5
BPCA Outstanding Debt
210.0
-
210.0
4.81%
Planned HNYC Debt
417.6
-
417.6
9.56%
Planned BPCA Debt
93.5
-
93.5
2.14%
34.96%
HNYC Outstanding Debt
Excess Revenues (2)
(1990-2020)
-
1,527.8
1,527.8
Other Revenues (3)
(1994-2003)
-
300.2
300.2
1,213.1
27.76%
1,828.0
4,369.7
100.00%
Unplanned Bondin
Potential
(4)
TOTAL:
1,213.1
-----
2,541.7
COSTS OF
ISSUANCE
USES:
$400 MILLION
BPCA PROJECT REPAYMENT OF
STATE ADVANCES HOUSING PROGRAM
COSTS
$193.1
BPCA Outstanding Debt
6.87%
$75.1
$189.4
$600 MILLION
HOUSING PROGRAM
OTHER NON
BPCA USES
-
-
CITY SPLIT
MONIES
$150.0
JOINT PURPOSE
MONIES
TOTAL
-
$607.5
67.4
-
142.6
-
-
-
-
210.0
Planned HNYC Debt
160.2
-
257.4
-
-
-
-
417.6
Planned BPCA Debt
37.5
-
-
-
-
HNYC Outstanding Debt
Excess Revenues (5)
-
Other Revenues
-
(1990-2020)
56.0
-
-
-
-
-
299.8
300.2
941.6
93.5
286.4
1,527.8
300.2
(1994-2003)
Unplanned Financings
424.6
TOTAL:
882.8
PERCENT:
20.20%
245.4
5.61%
75. 1
1.72%
(Footnotes on following page)
Source: Tom Oppenheim, MIT Center for Real Estate Development
1213.1
788.5
---------------------------------------------------------------------------------------------------4,369.7
286.4
941.6
938.5
600.0
400.0
100.00%
6.55%
21.55%
21.48%
13.73%
9.15%
FOOTNOTES
(1) These include the 1972, 1986, and 1990 BPCA bond issues.
(2) Revenues available from Pre 1986 subleases after debt service on Planned and Unplanned
financings plus annual operating/maintenance costs.
(3) Revenues from Post 1986 leases that are necessary to fulfill $600 million housing program.
from 1994 through 2002.
(4) Financings after the $600 million housing program is fulfilled. Proceeds available
for non-BPCA uses.
amounts that
(5) Includes $233.1 million in excess revenues and $66.7 million in City split
are used to fund $600 million housing program in the years 1990 through 2003.
(6) All information is derived from Figure 5.1 and Figure 5.2.
Graph 5.4-Who Benefits From BPC Funds?
Total Allocation: Current and Future
(1972-2020)
(Millions)
1200
1000
800
600
400
5 11I
2001-.
0
75.1
---
-
Budget Leverage
A&C
Bond Costs BPC NY Repmt Hsg.
(Uses of Funds)
-
City
Source: Tom Oppenheim, MIT CRED
BPCA/State
Cap I,reserves,fees
City Joint Purp.
City & BPCA
relief and by 1993, the City's $400-million housing program
will
have funded the
BPCA will
by 2003
Once
$1-billion New
the
remaining $600-million
the project.
from revenues of
in cash
housing commitment
Furthermore,
bond proceeds.
funded from
have been
Housing
York
Program has
been
fully funded, Excess Revenues will continue to provide cash
on an annual basis to the
$286
million,
Monies should
Joint Purpose
$941 million.
numbers, about
approximate
City from 2003 to 2020, in round
to
another benefit
the
City
since their use is subject to negotiations between the City
majority of
indication, a
past is any
If the
and BPCA.
these funds will go to the City, especially as Battery Park
and its monetary expenditures decline.
City gets built out
speculative to guess who
Finally, it is
the
$788
infrastructure
needs
The purpose
program.
jointly
those
than
other
bonds
between
the
of
planned to
the
and State,
will
housing
be decided
funds, likely
of these
City
and
project
the
immediate
the
meet
The
to issue
BPCA will be able
is the earliest the
year 2000
amounts.
leveraged
in unplanned
million
will benefit from
reflect
the
public sector at that time.
major policy objectives of the
not be necessary to fund a
Hopefully, by then, monies will
City budget deficit.
Interestingly, in
(only), the
dollar flows
terms of
entity that least benefits from the tremendous availability
of funds is
the
the real estate project itself.
last anticipated
to the
project, only
capital
7.3%
By 1993 when
expenditures are
(project costs
95
dedicated
including state
repayments) of
dedicated
will have been
the total funding resources
BPC.
to developing
This
amount will
increase
somewhat as a portion of Joint Purpose monies and unplanned
in
proportion
to
time.
project over
of
amount
the
These
remain relatively
however, will still
additional amounts,
small
to the
amounts flow
leveraged
total
funding
resources available.
Ironically,
portion of
essence of
developers.
structured
leased,
In
the public sector
First,
to
sold,
the
private
interests,
BPCA
negotiators
lease
the
reflect
to
(PILOTs)
value
of
eye toward boosting public
development matured.
Once revenues
be used
monies would
sufficient levels,
Second, the
to the site.
increasing assessments, with an
reached
Why? In simplified
creating new land and infrastructure
pricing
coffers as the project
true
structure turned out to be ingenious
not
payments
from the
captures the
development
the
and enticing private development
was
bricks-and-mortar
the least money
of money efficient.
undertook the risk of
land
the
that
the BPC capital structure.
- the capital
and the use
fact
the project receives
success of
financial
terms -
the
to fund
additional infrastructure needs of the project and to repay
any
gets
cash disbursement
built
out,
surpluses, after
expended to
capital
its
the payment
As
date.
needs
diminish
of all outstanding
project costs, are parlayed into other uses.
- now a "money machine" -
the public
sector in
-
the project
and
the
debt and
The project -
funds other essential needs of
the future.
96
With
the benefit
of a
this
perspective,
long-term
type of
the actual project relative
minimizes expenditures made to
to
This
objectives.
with
scheme
brilliant
by
realized
benefits
financial
phenomenal
a
is
indeed
nonproject
other,
for
funding used
significant
the
development
public
public
the
sector!
Risks Ahead
in
demonstrated
4.5%
growth
these
revenues will
$6.7
Furthermore,
public sector
beyond the- bricks and mortar,
and amenities
on the
does not seem
to be the stability of
project site.
to
benefits to
tremendous
provide
close
obligations.
BPCA and HNYC debt
and planned
revenue
supporting current
period, easily
a 30-year
billion over
As
a conservative
produce
will
rate,
BPCA?
Authority's
Three, the
Chapter
existing sublease payments, at
stream from
annual
risks ahead for the
any, are the
What, if
the
open spaces,
risk, therefore,
The
the existing revenue
stream, but rather the future plans of the project.
What
the
Authority is
for
planning
the future
ambitious, reasonably so given its track record.
Stuyvesant
northeastern-most
residential
World
$141
approximately
High
development
Financial
Center,
of
the
to the
is
million,
for
the
located
in
the
be
to
School
corner
The City,
necessary to cover the cost of
has agreed to provide funds
construction,
is
BPC
north
site.
and
progressing
Additional
south of
the
rapidly;
one
building has
been recently
other units
two
completed and
are underway.
construction of
Developers
of two
more
residential projects have been selected and construction is
begin soon.
scheduled to
to create
plans
public parks
has publicly announced
The BPCA
$100 million
nearly
covering close to
worth of
elaborate
30 acres, in an
effort to
make BPC a recreational center for all New Yorkers.[1]
The potential risk is that
ambitious, especially
estate
market.
existing
amount generated,
Authority,
sublease
given Manhattan's current
If
subleases
this
revenues
case,
be affected.
might have
to
support
with
immediate
obligations.
$600-million
the
but rather how they
for example,
in this
is
could
difficulty
monies
these new plans are overly
leasing
way
the
BPCA
intangible
in
additional
development, could
outstanding debt
if redirection
thereby
for
reducing
outstanding
delay funding
the
available to the City
A
significant,
weak
though
revenue-producing
of revenues
in several ways:
future
leverage
(with the
(i)
financings
the BPCA
is perceived
possible exception
This
the BPCA's cost
might
capability;
98
the
leverage
financial integrity of the bonds.
would be detrimental
borrowing
of
effect
their
sublease
reduce investor confidence in
as a threat to the
of
future.
having
meeting
reduce
The
existing
existing
Redirecting
the
dollar
developments
and consequently
and
from
get allocated.
new
program
the
to redirect
capability and discretionary amounts
and
revenues
Not
could potentially
housing
weak real
(ii)
be
all
of the
higher,
bonds
insured
might trade
bonds)
(iii)
the rating
outstanding by
all bonds
review of
potential
discounts; and
significant
at
agencies could result in a possible downgrading.
BPCA's
with
risk lies
final
Currently
source of income for existing sublease payments.
O&Y
main leasees
the
are
American Express
and
the core
themselves since they provide
commercial tenants
the
stability of
the
the
of
commercial parcels, with subtenants consisting primarily of
are
credit-worthy tenants
is
it
however,
not
a
implications of
to
excellent risks,
are
What
problem
in
potential
the
the commercial
in vacancy on
an increase
the
that
assume
credit
potential
environment.
economic
today's
and represent
unreasonable
represent
subtenants
American Express and O&Y
Both
financially oriented firms.
parcels to the public sector?
purposes, even if significant
For practical
the WFC
becomes vacant due
BPCA.
Although revenues to
shrink,
to
the companies
scheduled lease
interest of
doomsday
to find
risk; the
to
from
probably on
the road
would never be
leasees.
happen, the
However,
BPCA would
leasehold mortgage
their
would indicate
alternative funds
Default
the current
scenario were
face minimal
profitability
themselves were
payments.
to the
lease obligations
default on lease obligations
bankruptcy, unable
best
O&Y or American
O&Y and American Express would
the
on
infringing
investment, a
that
on their
would default
Express
on Wall
to continued cutbacks
highly unlikely that either
Street, it is
space in
to meet
in the
if this
still
lenders behind
would foreclose on the properties
O&Y and American Express
and most likely assume
BPCA
can
take
the lease payment obligations.
The
on
the
in knowing
comfort
the
of
some
are
phase
development
commercial
lenders
the
most
financially solvent institutions in the world today (Sanwa,
Sumitomo,
Hanover
Manufactures
others).[2]
and
Trust
Finally, if the lenders for some unknown reason decided not
to meet these unsubordinated lease payment obligations, the
billion.
to $5
approximately $3
asset worth
own an
State would now
to the BPCA, and the
project would revert
The
risk would be reduced to asset management of the property.
For
sector,
the public
project
entering
financially
remote.
Currently
operating
established
the City
by
and
demonstrated that significant
the
revenues
provide
objectives
policy
State.
more
and,
obligations
significant
other
importantly,
projects
BPC
seems
times
difficult
current
fund
to
sufficient
of the
the probability
Three
Chapter
reductions to PILOT payments
would have to occur (greater than 2.4% annually) for a long
period of time before the
of
its
BPCA would falter in meeting any
financial
current
sustained
A
obligations.
reduction in PILOTs of this magnitude, for a long period of
time, seems difficult to imagine given the duration of past
real
cycles
estate
increase in tax
this
of
backed by ample
New
and
York
collections over the past
perspective,
financings
in
therefore,
the BPCA
and
all
HNYC
historical
20 years.
From
and
planned
are excellent
credits
existing
revenues to meet debt
100
the
service payments on
over
ambitious development
benefit
can
it
package
expect
total
reduce the
plans might
realize
to
over
a
The $600-million housing program could
thirty-year period.
redirected for
to be
Revenues have
if Excess
be delayed
is that
to the public sector
The real risk
these bonds.
any reason.
The
project.
prosperous for
the
Unlike the 1970s, the greatest issue in the 1990s
how to generate revenues, but rather
and 2000s will not be
how to allocate the
is
be
to
should prove
future
likely
to
public/private
financial benefits the "money machine"
somewhat
It is
produce.
develop a
partnership to
unusual
for
a
massive project,
from scratch, that can be cheered by design experts, public
policy makers,
all,
financial minds,
person.
the average
respect and
more.
The
Battery
continuing faith
provided to the project in its
produced a magnificent financial
public sector
days of vacant
development and
can tap
most of
merits this
Park City
early vision and
both the State and the City
infancy has
architects, and,
for many years
resource the
to come.
land and no revenues to a
From the
time of bustling
generous cash flow, Battery
Park City has
become a public-sector financial dream, worthy of emulation
by all major cities across our nation.
101
NOTES
I acknowledge with gratitude the time and help that
both Robert Serpico, Vice President Finance/Treasurer of
the Battery Park City Authority, and Roger J. Bagley,
Partner of Hawkins, Delafield and Wood, gave to me
throughout the thesis process. Their availability and
willingness to provide information on a timely basis helped
tremendously with my understanding of the project and is
continually relied upon in the thesis.
CHAPTER TWO
Battery Park City Authority, "Battery Park City Fact
1.
Sheet," (1989).
Frederick O'R. Hayes, "Battery Park City Development
2.
History," Working Draft, Frederick O'R. Hayes Associates,
July 1, 1986, p.27.
Battery Park City Authority, Series A
3.
Statement, May 22, 1972, pp.18
1972 Official
4.
Ibid.
5.
Hayes, "Battery Park City Development History," pp.61.
"Less Secure State Bonds", New York Times, September
6.
11, 1979, Section D, pp.8.
7.
Battery Park City Authority, 1980 Annual Report, pp.1
8.
The balance of Chapter Two continually relies on the
following sources of information, unless otherwise
noted:
(i)
"Attempt To Revive Battery Park Plan Is Readied
Carey", New York Times, October 28, 1979,
Section I, p.1.
(ii)
Battery Park City Authority Agreements with the
City of New York, Memorandum of Understanding,
December 30, 1979.
(iii)
Battery Park City Authority Agreements with the
City of New York, Settlement Agreement, June 6,
1980.
(iv)
Battery Park City Authority Agreements with the
City of New York, Amendment to Settlement
Agreement, August 15, 1986.
(v)
Battery Park City Authority, Series 1,2 & A
1986 Official Statement, August 22, 1986.
102
(vi)
Housing New York Corporation, Series A. 1987
Official Statement, October 1, 1987.
(vii)
Battery Park City Authority Agreements with the
City of New York, Agreement and Consent,
December 30, 1989.
(viii) Telephone Interview with Peter J.Fugiel, Vice
President, John Nuveen & Co., (Chicago), May 25,
1990.
(ix)
Interview with Roger J. Bagley, Partner, Hawkins
Delafield and Wood, New York City, May 24,
1990 and June 18, 1990.
(xi)
Battery Park City Authority, Series 1990, 1990
Official Statement, May 31, 1990.
(xii)
Interview with Robert M. Serpico, Vice President
Finance/Treasurer, Battery Park City
Authority, New York City, June 18, 1990.
9.
Hayes, "Battery Park City DevelopmentHistory,"
pp.73-74.
10. S.L. Fordsham, "World Financial Center; Olympia & York
Sets Financial and Leasing Milestones in New York City,"
Urban Land, Volume 44 (No. 9), September 1985, p.22.
11. Hayes, "Battery Park City Development History,"
pp.73-75.
12.
Peter J. Fugiel, "Battery Park City Authority, 1972
Series A Bonds", Nuveen Research, John Nuveen & Co.
Incorporated, February 1, 1982.
13.
Calculated by amortizing the insurance premiums over
thirty years and estimating the minimum interest rate
differential necessary to equate the two costs. The BPCA
would not pay for insurance unless reduction in annual debt
service payments surpassed the insurance costs.
CHAPTER THREE
1.
Information regarding PILOT payments, growth rates,
historical New York tax policy, and tax abatements are
derived from Battery Park City Authority, Series 1990, 1990
Official Statement, "Cushman and Wakefield Pro Forma Cash
Flow Study", Appendix C, May 31, 1990, pp.la-43.
2.
Information regarding the flow of funds comes from the
following sources:
(i)
Battery Park City Authority Agreements with the
City of New York, Amendment to Settlement
103
Agreement, August 15, 1986.
(ii)
Battery Park City Authority, Series 1,2 & A,
1986 Official Statement, August 22, 1986.
(iii)
Housing New York Corporation, Series A_
Official Statement, October 1, 1987.
(iv)
Battery Park City Authority Agreements with the
City of New York, Agreement and Consent,
December 30, 1989.
(v)
Battery Park City Authority, Series 1990, 1990
Official Statement, May 31, 1990.
(vi)
Interview with Robert M. Serpico, Vice President
Finance/Treasurer, Battery Park City
Authority, New York City, June 18, 1990.
(vii)
Interview with Roger J. Bagley, Partner, Hawkins
Delafield and Wood, New York City, May 24,
1990 and June 18, 1990.
1987
3.
Battery Park City Authority Agreements with the City of
New York, Amendment To Agreement As To Certain Excess
Revenues Of the Battery Park City Authority, Estimated
Schedule, May 18, 1990.
This assumption is based on the review of the previous
4.
debt issuances of the BPCA and HNYC which, on average,
capitalized interest for three to five years.
5.
Interview with Bagley.
Real property assessment policy in New York changed in
6.
1983 to target 45 percent of market value of all commercial
and residential income-producing properties. A 6 to 7
percent annual assessment increase on nontransacted
buildings was presumably to bring all commercial and
multi-family properties to tax parity. New commercial
construction is assessed based on its state of completion as
of each January 5th and has no fixed phase-in period. On
stabilization, assessments are phased-in over 4 to 5 years.
Information derived from Cushman and Wakefield Pro Forma
Cash Flow Study.
7.
The 1989 Agreement and Consent stipulates that the BPCA
pay $50 million from monies received, net of Prior Claims,
to the City (Remittance to City) before the new $600 million
housing program scheduled payments commence in 1994.
I have
assumed that this $50 million remittance to the City will be
applied to the housing program. This amount ($50 million)
is represented as City split amounts and is fulfilled in
It should be understood that the City might
the year 1992.
have previously earmarked these monies for other uses,
104
which would impact the timing of the housing program being
fully funded.
CHAPTER FOUR
Amounts for the scheduled payments pursuant to the 1989
1.
A&C are derived from Battery Park City Authority Agreements
with the City of New York, Agreement and Consent, December
30, 1989, pp. 8.
CHAPTER FIVE
Battery Park City Authority, Series 1990, 1990 Official
1.
Statement, May 31, 1990, pp. 5-6.
Battery Park City Authority, "Presentation to
2.
Investors," (1990).
105
THIS PAGE LEFT INTENTIONALLY BLANK
106
APPENDIX A
107
APPENDIX A
BASE CASE SCENARIO
-
-
COMPLETE FINANCIALS
1990
1991
1992
1993
1994
1995
47 678,092
54 317 728
62,224,294
70,188,600
78,754,237
87,959,412
EXISTING SUBLEASE
REVENUES:(1)
Pilot
Base Rent/Other
Residential
TOTAL:
1972 Debt Service
0 & M/Administrative (2)
1972 Reserve Income (3)
EXCESS REVENUE FUND ("ERF") AMTS:
1986 Bonds Debt Service
1987 HNYC Debt Service (4)
1986 Reserve Income
1987 Reserve Income
AVAILABLE AMOUNTS:
Special Fund Deposit (5)
Pledged Rev.for 1990 Debt Service
DCR on 1990 Bonds
2cnd TIER "ERF" AMOUNTS:
Prj t.Rev.Bds. Pmts (1991-1993) (6)
HNYC Debt Srv. (1990-1993) (7)
12,394,134
10,975,198
9,951,377
8,927,555
7,895'530
6,797,374
19,033,111
17,485,304
16,147,148
15,035,896
13,843,345
12,547,006
---------------------------------------------------------------$119,386,657
$107,214,739
$96,287,125
$86,187,745
$76,056,603
$67,022,472
(14,285,000)
(14,285,000)
(14,285,000)
(14,285,000)
(14,285,000)
(14 285,000)
(17,740,314)
(16,895,537)
(16,090,988)
(15,324,750)
(14,595,000)
(13,900,000)
715,000
715,000
715,000
715,000
715,000
715,000
---------------------------------------------------------------88,076,343
76,749,202
66,626,138
57,292,995
47,891,603
39,552,472
(15,895,000)
(15,895,000)
(15,895,000)
(15,895,000)
(15,895,000)
(13,108,000)
(21,075,000) (21,075,000)
(21,075,000)
0
0
0
790,990
790,990
790,990
790,990
790,990
790,990
1,053,647
1,053,647
1,053,647
0
0
0
===----====-----------------------------------------------52,950,981
41,623,840
31,500,775
42,188,985
32,787,593
27,235,462
0
0
0
(17,000,000)
(17,000,000)
(17,000,000)
(16,000 000)
(16,000 000)
(16,000 000)
0
0
0
1.31
.60
1.97
0.00
0.00
0.00
---------------------------------36,950,981
25,623,840
15,500,775
25,188,985
15,787,593
10,235,462
(7,424,382)
(2,983,011)
0
0
0
0
0
(19,
) (7,409,706)
,
0
0
0
986 244
~--------------------------------2,654,585
2,116,892
(13,200,000)
10,545,415
0
(26,400,000)
24,283,108
0
10,235,462
15,787,593
25,188,985
15,500,775
0
0
0
0
0
0
0
0
10,235,462
15,787,593
25,188,985
15,500,775
City Split Used For Hsg.(80%) (10)
10,235,462
15,787,593
25,188,985
15,500,775
0
0
(Cummulative New Housing Program
Plus City Split)
10,235,462
26,023,055
51,212,040
66,712,815
79,912,815
106,312,815
Max. Avail. for Debt Service (11)
Leverage Capability (12)
New Bond De t Service
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
AVAILABLE AMOUNTS W/ LEVERAGE:
Total City Split Monies (13)
0
0
0
0
0
0
10,235,462
0
15,787,593
0
25,188,985
0
15,500,775
51,000,000
NET EXCESS APPLIED TO
SETTLEMENT AGREEMENT :
Hsg. Program Pmts. per A&C (8)
Other Revenues Needed (9)
NET EXCESS AVAILABLE FOR SPLIT:
Total Joint Purpose Monies W/ Leverage
FOOTNOTES: (See on last Page)
Source: Tom Oppenheim, M.I.T. CRED
---------------------------------------------------------
APPENDIX A
BASE CASE SCENARIO
1996
-
1997
-
COMPLETE FINANCIALS
1998
1999
2000
2001
2002
EXISTING SUBLEASE
REVENUES:(1)
Pilot
Base Rent/Other
Residential
TOTAL:
1972 Debt Service
0 & M/Administrative (2)
1972 Reserve Income (3)
EXCESS REVENUE FUND (IERF") AMTS:
135,094,782
129,277,304
123,710,338
118,383,099
112,476,224
105 322,128
97,098,348
29,117,602
28,757,535
27,716,780
19,149,408
15,760,650
14,394,949
13,394,453
26,655,552
25,758,504
24,976,523
24,250,945
23,580,565
22,406,334
20,638,658
=-------------------------------------------------------------------$190,867,936
$183,793,343
$176,403,641
$161,783,452
$151,817,439
$142,123,411
$131,131,459
(14,285,000)
(14,285,000)
(14,285,000)
(14,285,000)
(14 285,000)
(14 285,000)
(14 285,000)
(23,773,717) - (24,962,403)
(22,641,635)
(21,563,462)
(20,536,631)
(19,558,696)
(18,627,329)
715,000
715,000
715,000
715,000
715,000
715,000
715,000
--------------------------------------------------------------------152,335,533
146,449,626
140,192,006
126,649,990
117,710,808
108,994,715
98,934,130
Bonds Debt Service
HNYC Debt Service (4)
Reserve Income
Reserve Income
AVAILABLE AMOUNTS:
(15 895,000)
(21,075,000)
790,990
1,053,647
63,80,767
63,808,767
(15 895,000)
(21,075,000)
790,990
1,053,647
73,89,353
73,869,353
Special Fund Deposit (5)
Pledged Rev.for 1990 Debt Service
DCR on 1990 Bonds
2cnd TIER "ERF" AMOUNTS:
Prj t.Rev.Bds. Pmts (1991-1993) (6)
HNYC Debt Srv. (1990-1993) (7)
0
(16,0 0000)
1.99
0
(16,000 000)
47,808,767
57,869,353
1986
1987
1986
1987
NET EXCESS APPLIED TO
SETTLEMENT AGREEMENT :
4.62
(15,895,000)
(15,895,000)
(15,895,000)
(15,895,000)
(15,895,000)
(21,075,000)
(21,075,000)
(21,075,000)
(21,075,000)
(21,075,000)
790,990
790,990
790,990
790,990
790,990
1,053,647
1,053,647
1,053,647
1,053,647
1,053,647
82,55,44-91,24,62-0507-------------------------------------117,210,171
111,324,263
105,066,643
91,524,627
82,585,446
0
0
0
0
0
(19,700 000)
(19,700.000)
(19,700 000)
(19,700 000)
(19,700 000)
5.95
$.65
t.33
4.65
4.19
97,510,171
91,624,263
85,366,643
71,824,627
62,885,446
(7,424,382)
(7,424,382)
(7,424,382)
(7,424,382)
(7,424,382)
(7 424,382)
(7 424 382)
(36,746,137) (36,746,137) (36,746,137) (36,746,137)
(36,746,137) (36,746,137)
(32,620,405)
---------------------------------------------------------------------53,339,651
47,453,744
41,196,124
27,654,108
18,714,926
13,698,833
7,763,979
Hsg. Program Pmts. per A&C (8)
Other Revenues Needed (9)
NET EXCESS AVAILABLE FOR SPLIT:
(79,200,000)
(79,200,000)
(79,200,000)
(79,200,000)
(52,800,000) (66,000,000)
(39,600,000)
25,860,349
31,746,256
38,003,876
51,545,892
47,285,074
39,101,167
31,836,021
--------------------------------------------------------------------0
0
0
0
0
0
0
City Split Used For Hsg.(80%) (10)
(Cummutative New Housing Program
Plus City Split)
145,912,815
198,712,815
264,712,815
0
0
0
0
0
0
0
0
0
0
0
0
00
0
0
37,192,03:
35,871,483
367,972,913
0
0
0
0
------------------------------------0
0
0
0
0
0
0
0
0
0
0
0
0
0 ----------------------0
0
0
0
Max. Avail, for Debt Service (11)
Leverag Ca pability (12)
New Bond Debt Service
AVAILABLE AMOUNTS W/ LEVERAGE:
Total City Split Monies (13)
Total Joint Purpose Monies W/ Leverage
FOOTNOTES: (See on last Page)
Source: Tom Oppenheim, M.I.T. CRED
343,912,815
423,112,815
502,312,815
581,512,815
APPENDIX A
BASE CASE SCENARIO - - COMPLETE FINANCIALS
2003
2004
2005
2006
2007
2008
2009
EXISTING SUBLEASE
REVENUES:(1)
Pilot
Base Rent/Other
Residential
TOTAL:
1972 Debt Service
0 & M/Administrative (2)
1972 Reserve Income (3)
1986
1987
1986
1987
EXCESS REVENUE FUND ("ERF") AMTS:
Bonds Debt Service
HNYC Debt Service (4)
Reserve Income
Reserve Income
AVAILABLE AMOUNTS:
Special Fund Deposit (5)
Pledged Rev.for 1990 Debt Service
DCR on 1990 Bonds
2cnd TIER "ERF" AMOUNTS:
Prjt.Rev.Bds. Pmts (1991-1993) (6)
HNYC Debt Srv. (1990-1993) (7)
NET EXCESS APPLIED TO
SETTLEMENT AGREEMENT :
Hsg. Program Pmts. per A&C (8)
Other Revenues Needed (9)
NET EXCESS AVAILABLE FOR SPLIT:
City Split Used For Hsg.(80%) (10)
(Cummulative New Housing Program
Plus City Split)
Max. Avail. for Debt Service (11)
Leverage Capability (12)
New Bond De t Service
AVAILABLE AMOUNTS W/ LEVERAGE:
Total City Split Monies (13)
Total Joint Purpose Monies W/ Leverage
FOOTNOTES: (See on Last Page)
Source: Tom Oppenheim, M.I.T. CRED
183,845,333
175,928,548
168,352,678
161 103,041
154 165,589
147,526,880
141 174 048
30,263,743
30,510,162
30,197,704
30,023,703
29,824,365
29,615 998
29,399,439
33,120,125
32,080,338
31,091,427
30,133,363
29,217,952
28,316,232
27,470,298
--------------------------------------------------------------------$229,641,809 $238,519,048 $247,229,201
$213,207,906 $221,260,107
$205,459,110
$198,043,785
(14,285,000)
(14,285,000)
(14,285,000)
(14,285,000)
(14,285,000)
(14 285,000)
(14 285,000)
(31,859,055) (33,452,007) (35,124,608)
(28,897,102) (30,341,957)
(27,521,049)
(26,210,523)
715,000
715,000
715,000
715,000
715,000
715,000
715,000
--------------------------------------------------------------------198,534,593
191,497,041
184,212,754
177,348,150
170,740,804
164,368,061
158,263,262
(15,895,000)
(15,895,000)
(15,895,000)
(15,895,000)
(15,895,000)
(15 895,000)
(15 895,000)
(21,075,000)
(21,075,000)
(21,075,000)
(21,075,000)
(21,075,000)
(21,075,000)
(21,075,000)
790,990
790,990
790,990
790,990
790,990
790,990
790,990
1,053,647
1,053,647
1,053,647
1,053,647
1,053,647
1,053,647
1,053,647
---------------- =-----------------------------------------------------163,409,231
156,371,678
149,087,392
142,222,788
135,615,442
129,242,698
123,137,899
0
0
0
0
0
0
0
(19,700 00I )
(19,700 000)
(19,700 000)
(19,700 000)
(19,700 000)
(19,700 000)
(19,700 000)
A.2'
t.94
t.57
.22
t.88
t.56
t.25
103,437,899
109,542,698
115,915,442
122,522,788
129,387,392
136,671,678
143,709,231
(7,424,382)
(7,424,382)
(7,424,382)
(7,424,382)
(7 424,382)
(7,424,382)
(7 424,382)
(36,746,137)
(36,746,137) (36,746,137) (36,746,137) (36,746,137)
(36,746,137) (36,746,137)
---------------------------------------------------------------------99,538,711
92,501,159
85,216,872
78,352,268
71,744,922
65,372,179
59,267,380
0
0
0
0
0
0
40,780,195
65,372,179
71,744,922
78,352,268
85,216,872
92,501,159
99,538,711
0
0
0
0
0
0
0
0
0
0
0
0
(18,487,185)
600,000,000
0
49,769,356
46,250,579
42,608,436
39 176,134
35 872,461
32,686 089
0
60,321,060
58,024,231
47,754,825
29,479,950
39,613,621
41,002,458
38,640,113
(49,769,356)
(46,250,579)
(42,608,436)
(39,176,134)
(35,872,461)
(32,686,089)
0
---------------------------------------------------------------49,769,356
46,250,579
42,608,436
39,176,134
35,872,461
32,686,089
0
39,815,485
37,000,463
34,086,749
31,340,907
28,697,969
26,148,872
32 624 156
9,953,871
9,250,116
8,521,687
7,835,227
7,174,492
6,537,218
8,156,039
---------------------------------------------------------------------
APPENDIX A
BASE CASE SCENARIO
2010
-
2011
-
COMPLETE FINANCIALS
2012
2013
2014
2015
2016
EXISTING SUBLEASE
REVENUES:(1)
250,188, 09t
239,414,446
229,104,733
219,238,979
209,798,066
200,763,700
192 118 373
23,112,08'
23,014,176
27,527,425
28,338,600
28,228,605
28,123,689
27,878,024
45,769,76
44,452,130
43,185,173
41,966,945
38,768,467
35,663,218
34,226,291
--------------------------------------------------------------------$306,880,752 $319,069,943
$299,817,331
$254,222,688 $264,550,607 $276,795,138 $289,544,524
Pilot
Base Rent/Other
Residential
TOTAL:
1972 Debt Service
0 & M/Administrative (2)
1972 Reserve Income (3)
EXCESS REVENUE FUND ("ERF") AMTS:
(14,285,000)
(14,285,000)
(14,285,000)
(14,285,000)
(14,285,000)
(49,423,850)
(44,828,889) (47,070,334)
(40,661,124) (42,694,180)
(36,880,838) (38,724,880)
0
0
715,000
715,000
715,000
715,000
715,000
--------------------------------------------------------------------269,646,093
259,810,418
241,418,442
233,280,344
222,564,014
212,255,727
203,771,850
Bonds Debt Service
HNYC Debt Service (4)
Reserve Income
Reserve Income
AVAILABLE AMOUNTS:
(15,895,000)
(15,895,000)
(15,895,000)
(15,895,000)
(15,895,000)
(15,895,000)
(15 895,000)
(21,075,000)
(21,075,000)
(21,075,000)
(21,075,000)
(21,075,000)
(21,075,000)
(21,075,000)
790,990
790,990
790,990
790,990
790,990
790,990
790,990
1,053,647
1,053,647
1,053,647
1,053,647
1,053,647
1,053,647
1,053,647
--------------------------------------------------------------------234,520,730
224,685,056
206,293,079
198,154,981
187,438,652
177,130,365
168,646,487
Special Fund Deposit (5)
Pledged Rev.for 1990 Debt Service
DCR on 1990 Bonds
0
0
0
0
0
0
0
(19,700000)
100 000)
0
(19,9,7
(19,700 000)
(19,700 000)
(19,700 000)
(19,700 000)
11.90
11.41
10.47
16.06
.51
A.99
A.56
--------------------------------------------------------------------214,820,730
204,985,056
186,593,079
178,454,981
167,738,652
157,430,365
148,946,487
(7,424,382)
(7,424,382)
(7,424,382)
(7,424,382)
(7,424,382)
(7,424,382)
(7 424,382)
(36,746,137) (36,746,137)
(36,746,137) (36,746,137)
(36,746,137) (36,746,137) (36,746,137)
---------------------------------------------------------------------170,650,211
160,814,536
142,422,560
134,284,462
123,568,132
113,259,845
104,775,968
1986
1987
1986
1987
2cnd TIER "ERF"
AMOUNTS:
Pr t.Rev.Bds. Pmts (1991-1993) (6)
HNYC Debt Srv. (1990-1993) (7)
NET EXCESS APPLIED TO
SETTLEMENT AGREEMENT :
Hsg. Program Pmts. per A&C (8)
Other Revenues Needed (9)
NET EXCESS AVAILABLE FOR SPLIT:
City Split Used For Hsg.(80%) (10)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
104,775,968
113,259,845
123,568,132
134,284,462
142,422,560
160,814,536
170,650,211
(Cummulative New Housing Program
Plus City Split)
0
Max. Avail. for Debt Service (11)
Leverage Capability (12)
New Bond Debt Service
52 387 984
45,808,472
(52'387'984)
56 629 923
103,526,444
(56'629'923)
61,784,066
55,363,945
(61 784 066)
67,142,231
131,359,460
(67,142,231)
71,211,280
59,836,187
(71,211,280)
80,407,268
61,357,953
(80,407,268)
85,325,105
0
(85,325,105)
52,387,984
56,629,923
61,784,066
67,142,231
71,211,280
80,407,268
85,325,105
41 910,387
10,477,597
68,260,084
64,325,815
56,969,024
53,713,785
49,427,253
45 303 938
17,065,021
16,081,454
14,242,256
13,428,446
12,356,813
11,325,985
--------------------------------------------------------
AVAILABLE AMOUNTS W/ LEVERAGE:
Total City Split Monies (13)
Total Joint Purpose Monies W/ Leverage
FOOTNOTES: (See on last Page)
Source: Tom Oppenheim, M.I.T. CRED
APPENDIX A
BASE CASE SCENARIO
-
-
COMPLETE FINANCIALS
2017
2018
2019
2020
261,446,560
21,187,106
47,140,107
273,211,656
21,221,797
48,565,262
285,506,180
21, 258,572
50,047,422
298,353,958
9,541,630
51,588,870
$329,773,773
$342,998,715
$356,812,174
$359,484,458
EXISTING SUBLEASE
REVENUES:(1)
Pilot
Base Rent/Other
Residential
TOTAL:
1972 Debt Service
0 & M/Administrative (2)
1972 Reserve Income ( )
EXCESS REVENUE FUND ("ERF") AMTS:
1986
1987
1986
1987
Bonds Debt Service
HNYC Debt Service (4)
Reserve Income
Reserve Income
AVAILABLE AMOUNTS:
Special Fund Deposit (5)
Pledged Rev.for 1990 Debt Service
DCR on 1990 Bonds
2cnd TIER "ERF" AMOUNTS:
Prj t.Rev.Bds. Pmts (1991-1993) (6)
HNYC Debt Srv. (1990-1993) (7)
NET EXCESS APPLIED TO
SETTLEMENT AGREEMENT :
Hsg. Program Pmts. per A&C (8)
Other Revenues Needed (9)
NET EXCESS AVAILABLE FOR SPLIT:
City Split Used For Hsg.(80%) (10)
(Cummutative New Housing Program
Plus City Split)
Max. Avail. for Debt Service (11)
Leverage Capability (12)
New Bond De t Service
AVAILABLE AMOUNTS W/ LEVERAGE:
Total City Split Monies (13)
Total Joint Purpose Monies W/ Leverage
FOOTNOTES: (See on last Page)
Source: Tom Oppenheim, M.I.T. CRED
(51,895,043)
0
(54,489,795)
0
(57,214,285)
0
(60,074,999)
0
277,878,730
0
(21,075,000)
0
1,053,647
288,508,920
0
(21,075,000)
0
1,053,647
299,597,889
0
(21,075,000)
0
1,053,647
299,409,459
0
(21,075,000)
0
1,053,647
257,857,378
0
(19,700 000)
11.09
268,487,567
0
(19,700 000)
11.63
279,576,537
0
(19,700 000)
279,388,106
0
(19,700 000)
14.18
238,157,378
248,787,567
259,876,537
259,688,106
(7,424,382)
(36,746,137)
193,986,858
(7,424,382)
(36,746,137)
204,617,048
(7,424,382)
(36,746,137)
215,706,017
(7,424,382)
(36,746,137)
215,517,587
14.19
0
0
0
0
0
0
0
0
193,986,858
204,617,048
215,706,017
215,517,587
107,853,009
0
(107,758,793)
107,758,793
0
(107,758,793)
107,947,224
107,758,793
86,357,779
21,589,445
86,207,035
21,551,759
102,308,524
96,993,429
0
0
(96,993,429) (102,308,524)
102,308,524
96,993,429
77,594,743
19,398,686
81,846,819
20,461,705
FOOTNOTES:
(1)Derived from 1990 Cushman & Wakefield, Inc. BPCA Pro Forma Cash Flow Study. These figures reflect only those
revenues derived from Existing Sublease Revenues and do not include Post-1986 Leases, Transaction payments , New Leases,
Lump Sum Payments or Future Revenues. Assumed growth rate is 4.5% per year.
(2) The 1990 O&M/Ackninistrative budgeted amounts is $13,900,000 with a 5% growth rate for the remaining
years.
(3) Reserve Fund Deposit amount is $14,300,000 which approximates the original deosit to the reserve fund.
The deposits for the 1986 and 1987 reserve funds are $15 819 802 and 521,072,949 respectively. These amounts
also represent original deposit amounts and all reserve funds assume an investment earnings rate of 5%.
(4) Pursuant to the Ammendment to First Dedication Instrument dated 9/15/1987, capitalized interest was extended
to cover interest through 1992 on the 1987 HNYC bonds. Assume first principal and interest payment to occur in 1993.
H
(5) Pursuant to the 1990 Revenue Bond Resolution, excess revenue funds available are to deosited into a Special Fund
so that the amount is not in excess of $17 million in 1990, $34 million in 1991, and $51 million in 1992.
The purpose is to provide additional coverage for the 1990 bonds in case of insufficient revenues. The monies are available
for any purpose the City and Authority jointly decide after 1992. The antaysis assumes that the monies are deposited
in the Fund for three years and then are released as Joint Purpose Monies in 1993 as reflected by the $51 million in Joint
Purpose monies in 1993 plus the traditional split that occurs from Available Amounts. During the years 1990-1992 the analysis
assumes that all remaining Available Amounts, after deposit to Special Fund, go to the City as split amounts and are used
to fund the obligations under the 1989 A&C.
(6) Assumes BPCA anticipated future infrastructure financings of $22.5 million and $33.5 million net proceeds in 1991 and 1992
respectively. Net Proceeds account for 67% of bonds issued to account for three years of capitalized interest costs of issuance,
and reserve fund deposits. Figures derived from 1990 Amendment to Agreement as to Certain Excess Revenues of BPCA,
5/18/90 estimated schedule.
(7) Assumes HNYC anticipated future financings for the Housing New York Program of $140 million $52 million,
$36.5 million, and $28.9 million in net proceeds for the consecutive years commencing in 190 and ending in 1993.
Net Proceeds account for 62.22% of bonds issued to account for 4 years of capitalizd interest, costs of issuance,
reserve fund deposits.
(8) Amounts given in the 1989 A&C commencing in 1994 and ending when hsg. program fulfilled. Amounts to be paid
excess revenues, prior to traditional 80%/20% split, and other revenues available. See next footnote.
(9) Necessary revenues from sources other than existing subleases (i.e., new leases, transaction payments etc)
to pay for commitment under the A&C housing obligations.
(10) Amounts available for City split that go to fund the A&C obligations. I have assume that the $50 remittance to the City obligation
under the 1989 A&C will go to fund the new housing program. Therefore, this amount ($50 million) is shown as City split amounts and
is fulfilled by 1992.
(11) Assumes a conservative 2 times debt coverage ratio.
(12) Assumes the first year leveraged amounts could be issued would be 2000, and assumes 3 full years of capitalized interest.
(13) City split amounts are not available from 1994 until 2003 because excess revenues before the split is being used to fund
$600 million housing obligation.
*
All figures are derived from the 1986 and 1990 Battery Park City Authority Official Statements, as well
as the 1987 Housing New York Corporation Official Statement. A&C annual payments are derived from
the 1989 Agreement and Consent document.
APPENDIX B
114
APPENDIX B
ALTERNATIVE SCENARIO
-
-
COMPLETE FINANCIALS
1991
1992
54 317,728
47 678,092
7,895,530
6,797,374
13,843,345
12,547,006
--------------------$76,056,603
$67,022,472
62,224,294
8,927,555
15,035,896
1990
1994
1993
1995
EXISTING SUBLEASE
REVENUES:(1)
Pilot
Base Rent/Other
Residential
TOTAL:
1972 Debt Service
0 & M/Administrative (2)
1972 Reserve Income (3)
EXCESS REVENUE FUND ("ERF") AMTS:
Bonds Debt Service
HNYC Debt Service (4)
Reserve Income
Reserve Income
1986
1987
1986
1987
AVAILABLE AMOUNTS:
Special Fund Deposit (5)
P edged Rev.for 1990 Debt Service
DCR on 1990 Bonds
2cnd TIER "ERF" AMOUNTS:
Pr t.Rev.Bds. Pmts (1991-1993) (6)
HNYC Debt Srv. (1990-1993) (7)
NET EXCESS APPLIED TO LEVERAGE
$86,187,745
87,959,412
78,754,237
70,188,600
12,394,134
10,975,198
9,951,377
19,033,111
17,485,304
16,147,148
------------------------$119,386,657
$96,287,125 $107,214,739
(14,285,000)
(14,285,000)
(14,285,000)
(14,285,000)
(14,285,000)
(14 285,000)
(17,740,314)
(16,895,537)
(16,090,988)
(15,324,750)
(14,595,000)
(13,900 000)
715,000
715,000
715,000
715,000
715,000
715,000
---------------------------------------------------------------88,076,343
76,749,202
66,626,138
57,292,995
47,891,603
39,552,472
(15,895,000)
(15,895,000)
(15,895,000)
(15,895,000)
(15,895,000)
(13,108,000)
(21,075,000)
(21,075,000) (21,075,000)
0
0
0
790,990
790,990
790,990
790,990
790,990
790,990
1,053,647
1,053,647
1,053,647
0
0 ====------------------------------------------0
----------52,950,981
41,623,840
31,500,775
42,188,985
32,787,593
27,235,462
0
0
0
(17,000,000)
(17,000,000)
(17,000,000)
(16,000 000)
(16,000 000)
(16,000 000)
0
0
0
3.31
E60
1-97
0.00 -------------0.00
0.00
=------------------------36,950,981
25,623,840
15,500,775
25,188,985
15,787,593
10,235,462
0
0
0
0
10,235,462
15,787,593
(7,424,382)
(2,983,011)
0
0
(27,409,706)
(19,986,244)
0
0 -~-----------------------------------2,116,892
2,654,585
15,500,775
25,188,985
1,058,446
50,317,684
0
-------2,116,892
10,235,462
15,787,593
1,327,292
0
105,344,293
0
0
0
----------------------------2,654,585
15,500,775
25,188,985
City Split (80%)
Joint Purpose Monies (20%)
NEW HOUSING PROGRAM:
City Split Monies (10)
Other Revenues (11)
Leveraged Amounts
10,235,462
0
15,787,593
0
25,188,985
0
10,235,462
0
0
15,787,593
0
0
CummuLative Housing Balance
Extra Monies Paid per A&C (12)
City Split Benefit (13)
Savings (Freed Monies) (14)
Savings (PV @ 8.00%)
10,235,462
0
0
26,023,055
0
0
1,693,514
2,123,668
15,500,775
25,188,985
24,283,108
10,545,415
0
0
32,706,495
68,473,791
0 -------- 0 --------------------------206,538,806
147,855,689
66,712,815
51,212,040
0
0
0
0
0
0
0
0
Max. Avail. for Debt Service (8)
Leverage Capability (9)
New Bond Debt Service
NET AVAILABLE AMOUNTS
FOOTNOTES: (See Last page)
Source: Tom Oppenheim, M.I.T. CRED
0
0
0
0
0
0,
112,003,201
42,700,000
-
0
0
0
-
15,500,775
51,000,000
-
2,123,668
530,917
-
1,693,514
423,378
APPENDIX B
ALTERNATIVE SCENARIO
1996
-
-
COMPLETE FINANCIALS
1997
1998
1999
2000
2002
2001
EXISTING SUBLEASE
REVENUES:(1)
Pilot
Base Rent/Other
Residential
TOTAL:
1972 Debt Service
0 & M/Administrative (2)
1972 Reserve Income (3)
EXCESS REVENUE FUND ("ERF") AMTS:
1986 Bonds Debt Service
1987 HNYC Debt Service (4)
1986 Reserve Income
1987 Reserve Income
AVAILABLE AMOUNTS:
Special Fund Deposit (5)
Pledged Rev.for 1990 Debt Service
DCR on 1990 Bonds
2cnd TIER "ERF" AMOUNTS:
Prj t.Rev.Bds. Pmts (1991-1993) (6)
HNYC Debt Srv. (199 -1993) (7)
NET EXCESS APPLIED TO LEVERAGE
Max. Avail. for Debt Service (8)
Leverage Ca ability (9)
New Bond Debt Service
NET AVAILABLE AMOUNTS
City Split (80%)
Joint Purpose Monies (20%)
NEW HOUSING PROGRAM:
City Split Monies (10)
other Revenues (11)
Leveraged Amounts
135,094,782
129,277,304
123,710,338
118,383,099
112,476,224
105 322,128
97,098,348
29,117,602
28,757,535
27,716,780
19,149,408
15,760,650
14,394,949
13 394,453
26,655,552
25,758,504
24,976,523
24,250,945
23,580,565
22 ,406,334
20,638,658
7
------------------------------------------------------------------------$190,867,936
$183,793,343
$176,403,641
$161,783,452
$151,817,439
$142,123,411
$131,131,459
(15 895,000)
(21,075,000)
790 990
1,053,647
(15 895,000)
(21,075,000)
790,990
1,053,647
(15,895,000)
(21,075,000)
790,990
1,053,647
(15,895,000)
(21,075 000)
790,990
1,053,647
(15,895,000)
(21,075,000)
790,990
1,053,647
63,808,767
0
(16,000 000)
K.99
47,808,767
73,869,353
0
(16,000 000)
82,585,446
0
(19,700 000)
91,524,627
0
(19,700 000)
105,066,643
111,324,263
117,210,171
57,869,353
62,885,446
71,824,627
0
(19,700 000)
$.33
85,366,643
0
(19,700 000)
$.65
91,624,263
0
(19,700 000)
95
-.
97,510,171
(14 285,000)
(14 285,000)
(20,536,631)
(19,558,696)
715,000
715,000
1,08
189,5
-117,710,808-108,994,715
4.62
4.19
(14,285,000)
(14,285,000)
(22,641,635)
(21,563,462)
715,000
715,000
1,90
166,9
126,649,990 --- 140,192,006 --
4.65
FOOTNOTES: (See last page)
Source: Tom Oppenheim, M.I.T. CRED
---------------
(7,424,382)
(7,424,382)
(7,424,382)
(7,424,382)
7,424,382)
(7 424,382)
(7,424,382)
(6,746,137)
(6,746, 137)
(6,746,137)
(6,746,137)
(36746,137)
(6,746,1137)
(2,620:405)
------------------------------------------------------------------------53,339,651
47,453,744
41,196,124
27,654,108
18,714,926
13,698,833
7,763,979
26,669,826
23, 726,872
20,598,062
13,827,054
9,357,463
6,849,417
3,881,990
37,192,034
35,871,483
34,363,251
33,366,544
33,131,134
35,223,466
76,226,540
(23,726,872) (26,669,826)
(20,598,062)
(13,827,054)
(9,357,463)
0
0
------------------------------------------1
9,357,463
13,698,833
7 3
26,669,826
23,726,872
20,598,062
13,827,054
9,357,463
13,698,833
7,763,979
21,335,860
18,981, 498
16, 478,450
11,061, 643
7,485,971
10 959 067
6 211 184
5,333,965
4,745,374
4,119,612
2,765,411
1,871,493
2,739,767
1,552,796
6 211,184
31,836,021
49,547,251
10 959,067
39,101,167
22,895,253
7,485,971
47,285,074
21,535,237
11, 061,643
51,545,892
21,688,253
16,478,450
38,003,876
22,336,113
31,746,256
443,395,030
0
0
527,690,818
0
0
604,509,257
4,509,257
0
31,746,256
18,981,498
-
--------------------------------------------
Cummulative Housing Balance
Extra Monies Paid per A&C (12)
City Split Benefit (13)
Savings (Freed Monies) (14)
Savings (PV @ 8.00%)
(14,285,000)
(24,962,403)
715,000
1,35---------152,335,533
(15,895,000)
(21,075,000)
790,990
1,053,647
(14,285,000)
(23,773,717)
715,000
144,2
146,449,626-(15,895,000)
(21,075,000)
790,990
1,053,647
(14,285,000)
(18,627,329)
715,000
9,41
--98,934,130 --
294,133,261
0
0
367,088,748
0
0
25,860,349
-
-
-
25,860,349
21,335,860
-------------------------M -----------------------
---
APPENDIX B
ALTERNATIVE SCENARIO
-
-
COMPLETE FINANCIALS
2009
2008
2007
2006
2005
2004
2003
EXISTING SUBLEASE
REVENUES:(1)
Pilot
Base Rent/Other
Residential
TOTAL:
1972 Debt Service
0 & M/Administrative (2)
1972 Reserve Income (3)
EXCESS REVENUE FUND ("ERF") AMTS:
1986 Bonds Debt Service
1987 HNYC Debt Service (4)
1986 Reserve Income
1987 Reserve Income
AVAILABLE AMOUNTS:
Fund Deposit (5)
Spcial
P edged Rev.for 1990 Debt Service
DCR on 1990 Bonds
2cnd TIER "ERF" AMOUNTS:
Pr t.Rev.Bds. Pmts (1991-1993) (6)
HNYC Debt Srv. (1990-1993) (7)
NET EXCESS APPLIED TO LEVERAGE
Max. Avail. for Debt Service (8)
Leverage Ca pability (9)
New Bond Debt Service
NET AVAILABLE AMOUNTS
City Split (80%)*
Joint Purpose Monies (20%)
NEW HOUSING PROGRAM:
City Split Monies (10)
Other Revenues (11)
Leveraged Amounts
Cummulative Housing Balance
Extra Monies Paid per A&C (12)
City Split Benefit (13)
Savings (Freed Monies) (14)
Savings (PV @ 8.00%)
FOOTNOTES: (See last page)
Source: Tom Oppenheim, M.I.T. CRED
141
29,615,998
29,824,365
30,023,703
28,316,232
27,470,298
------------------------------
29,217,952
30,133,363
$205,459,110
$198,043,785
(14
285,000)
(26,210,523)
30,263,743
30,510,162
30,197,704
31,091,427
-------------------------------
33,120,125
32,080,338
$247,229,201
$238,519,048
$229,641,809
$221,260,107
$213,207,906
183,845,333
175,928,548
168,352,678
161,103,041
154,165,589
147,526,880
174,048
29,399,439
(14,285,000)
(14,285,000)
(14,285,000)
(14,285,000)
(14,285,000)
(14,285,000)
(27,521,049)
(28,897,102)
(30,341,957)
(31,859,055)
(33,452,007)
(35,124,608)
715,000
715,000
715,000
-----------------------
715,000
715,000
715,000
715,000
==-------------------------------------
158,263,262
164,368,061
170,740,804
177,348,150
184,212,754
191,497,041
198,534,593
(15,895,000)
(15,895,000)
(15,895,000)
(15,895,000)
(15,895,000)
(15,895,000)
(15,895,000)
(21,075,000)
(21,075,000)
(21,075,000)
(21,075,000)
(21,075,000)
(21,075,000)
1,053,647
1,053,647
1,053,647
----------------------------------------------------------
---
000)
(19,700
6.56
6.25
-----------103,437,899
424,382)
(7
000)
(19,700
109,542,698
(7,424,382)
(19,700
000)
(19,700
000)
(7,424,382)
122,522,788
(7,424,382)
163,409,231
156,371,678
000)
(19,700
129,387,392
(7,424,382)
0
0
000)
(19,700
136,671,678
(7,424,382)
A.29
143,709,231
(7,424,382)
(36,746,137)
(36,746,137)
(36,746,137)
(36,746,137)
(36,746,137)
(36,746,137)
(36,746,137)
59,267,380
65,372,179
71,744,922
78,352,268
85,216,872
92,501,159
99,538,711
32,686,089
35,872,461
39,176,134
42,608,436
46,250,579
49,769,356
38,640,113
41,002,458
39,613,621
29,479,950
47,754,825
58,024,231
60,321,060
(29,633,690)
(32,686,089)
(35,872,461)
(39,176,134)
(42,608,436)
(46,250,579)
(49,769,356)
29,633,690
32,686,089
35,872,461
39,176,134
42,608,436
46,250,579
49,769,356
23,706,952
26,148,872
28,697,969
31,340,907
34,086,749
37,000,463
39,815,485
29
633,690
5,926,738
18,487,185
18,487,185
(8,917,204)
6,537,218
7,174,492
7,835,227
8,521,687
9,250,116
000)
(19,700
t.94
t-57
t-.22
6.88
====-----------------------------------115,915,442
1,053,647
0
0
0
0
0
149,087,392
142,222,788
135,615,442
129,242,698
123,137,899
790,990
990
1,053,647
1,053,647
1,053,647
(21,075,000)
790
790,990
790,990
790,990
790,990
790,990
9,953,871
APPENDIX B
ALTERNATIVE SCENARIO
-
-
COMPLETE FINANCIALS
2010
2011
2012
2013
2014
2015
2016
192,118,373
27,878,024
34,226,291
200,763,700
28,123,689
35,663,218
209,798,066
28,228,605
38,768,467
219,238,979
28,338,600
41,966,945
229,104,733
27,527,425
43,185,173
239,414,446
23,014,176
44,452,130
250,188,096
23,112,081
45,769,766
$254,222,688
$264,550,607
$276,795,138
$289,544,524
$299,817,331
$306,880,752
$319,069,943
EXISTING SUBLEASE
REVENUES:(1)
Pilot
Base Rent/Other
Residential
TOTAL:
(14,285,000)
(36,880,838)
715,000
(14,285,000)
(38,724,880)
715,000
(14,285,000)
(40,661,124)
715,000
(14,285,000)
(42,694,180)
715,000
(14,285,000)
(44,828,889)
715,000
(47,070,334)
0
(49,423,850)
0
203,771,850
212,255,727
222,564,014
233,280,344
241,418,442
259,810,418
269,646,093
(15,895,000)
(21,075,000)
790,990
1,053,647
(15,895,000)
(21,075,000)
790,990
1,053,647
(15,895,000)
(21,075,000)
790,990
1,053,647
(15,895,000)
(21,075,000)
790,990
1,053,647
(15,895,000)
(21,075,000)
790,990
1,053,647
(15,895,000)
(21,075,000)
790,990
1,053,647
(15,895,000)
(21,075,000)
790,990
1,053,647
AVAILABLE AMOUNTS:
SpeciaL Fund Deposit (5)
Pledged Rev.for 1990 Debt Service
DCR on 1990 Bonds
168,646,487
0
(19,700 000)
A.56
177,130,365
0
(19,700 000)
A.99
187,438,652
0
(19,700 000)
0.51
198,154,981
0
(19,700 000)
16.06
206,293,079
0
(19,700 000)
16.47
224,685,056
0
(19,700 000)
11.41
234,520,730
0
(19,700 000)
11.90
2cnd TIER "ERF" AMOUNTS:
148,946,487
157,430,365
167,738,652
178,454,981
186,593,079
204,985,056
214,820,730
(7,424,382)
(36,746,137)
(7,424,382)
(36,746,137)
1972 Debt Service
0 & M/Administrative (2)
1972 Reserve Income ( )
EXCESS REVENUE FUND ("ERF") AMTS:
1986
1987
1986
1987
Bonds Debt Service
HNYC Debt Service (4)
Reserve Income
Reserve Income
Prjt.Rev.Bds. Pmts (1991-1993) (6)
HNYC Debt Srv. (1990-1993) (7)
(7,424,382)
(36,746,137)
(7,424,382)
(36,746,137)
(7,424,382)
(36,746,137)
(7,424,382)
(36,746,137)
(7,424,382)
(36,746,137)
NET EXCESS APPLIED TO LEVERAGE
104,775,968
113,259,845
123,568,132
134,284,462
142,422,560
160,814,536
170,650,211
Max. Avail. for Debt Service (8)
Leverage CapabiLity (9)
New Bond Debt Service
52,387,984
45,808,472
(52,387,984)
52,387,984
56,629,923
103,526,444
(56,629,923)
56,629,923
61,784,066
55,363,945
(61,784,066)
61,784,066
67,142,231
131,359,460
(67,142,231)
67,142,231
71,211,280
59,836,187
(71,211,280)
71,211,280
80,407,268
61,357,953
(80,407,268)
85,325,105
0
(85,325,105)
80,407,268
85,325,105
49,427,253
12,356,813
53,713,785
13,428,446
56,969,024
14,242,256
64,325,815
16,081,454
68,260,084
17,065,021
NET AVAILABLE AMOUNTS
City Split (80%)
Joint Purpose Monies (20%)
NEW HOUSING PROGRAM:
City Split Monies (10)
Other Revenues (11)
Leveraged Amounts
Cummulative Housing Balance
Extra Monies Paid per A&C (12)
City Split Benefit (13)
Savings (Freed Monies) (14)
Savings (PV @ 8.00%)
FOOTNOTES: (See last page)
Source: Tom Oppenheim, M.I.T. CRED
41,910,387
10,477,597
45,303,938
11,325,985
APPENDIX B
ALTERNATIVE SCENARIO
-
-
COMPLETE FINANCIALS
2017
2018
2019
2020
261,446,560
21,187,106
47,140,107
273,211,656
21, 221,797
48,565,262
285,506,180
21,258,572
50,047,422
298,353,958
9,541,630
51,588,870
$329,773,773
$342,998,715
$356,812,174
$359,484,458
EXISTING SUBLEASE
REVENUES:(1)
Pilot
Base Rent/Other
Residential
TOTAL:
1972 Debt Service
0 & M/Administrative (2)
1972 Reserve Income (3)
(51,895,043)
0
(54,489,795)
0
(57,214,285)
0
(60,074,999)
0
EXCESS REVENUE FUND ("ERF") AMTS:
1986 Bonds Debt Service
1987 HNYC Debt Service (4)
1986 Reserve Income
1987 Reserve Income
277,878,730
288,508,920
299,597,889
299,409,459
0
(21,075,000)
0
1,053,647
0
(21,075,000)
0
1,053,647
0
(21,075,000)
0
1,053,647
0
(21,075,000)
0
1,053,647
AVAILABLE AMOUNTS:
257,857,378
268,487,567
279,576,537
279,388,106
Special Fund Deposit (5)
Pledged Rev.for 1990 Debt Service
DCR on 1990 Bonds
2cnd TIER "ERF" AMOUNTS:
0
(19,700 000)
13.09
0
(19,700 000)
13.63
0
(19,700000)
14.19
238,157,378
248,787,567
259,876,537
0
1000)
-18
(1
259,688,106
Prjt.Rev.Bds. Pmts (1991-1993) (6)
HNYC Debt Srv. (1990-1993) (7)
(7,424,382)
(36,746,137)
(7,424,382)
(36,746,137)
(7,424,382)
(36,746,137)
(7,424,382)
(36,746,137)
NET EXCESS APPLIED TO LEVERAGE
Max. Avail. for Debt Service (8)
Leverage Capability (9)
New Bond Debt Service
NET AVAILABLE AMOUNTS
193,986,858
204,617,048
215,706,017
215,517,587
107,853,009
0
(107,758,793)
107,758,793
0
(107,758,793)
107,947,224
107,758,793
86,357,779
21,589,445
86,207,035
21,551,759
City Split (80%)
Joint Purpose Monies (20%)
NEW HOUSING PROGRAM:
City Split Monies (10)
Other Revenues (11)
Leveraged Amounts
Cummulative Housing Balance
Extra Monies Paid per A&C (12)
City Split Benefit (13)
Savings (Freed Monies) (14)
Savings (PV @ 8.00%)
FOOTNOTES: (See last page)
Source: Tom Oppenheim, M.I.T. CRED
102,308,524
96,993,429
0
0
(96,993,429) (102,308,524)
102,308,524
96,993,429
77,594,743
19,398,686
81,846,819
20,461,705
FOOTNOTES:
(1) Derived from 1990 Cushman & Wakefield, Inc. BPCA Pro Forma Cash Flow Study. These figures reflect only those
revenues derived from Existing Sublease Revenues and do not include Post-1986 leases, Transaction payments, New leases,
Lump Sum Payments or Future Revenues. Assumed growth rate is 4.5% per year from 2000-2020.
(2) The 1990 O&M/Administrative budgeted amounts is $13,900,000 with a 5% growth rate for the remaining
years. Source: 1990 Official Statement.
(3)Reserve Fund Deposit amount is $14,300,000 which approximates the original deposit to the reserve fund.
The deposits for the 1986 and 1987 reserve funds are $15 819,802 and $21,072,949 respectively. These amounts
also represent original deposit amounts and all reserve funds assume an investment earning rate of 5%.
0
extended
(4) Pursuant to the Ammendment to First Dedication Instrument dated 9/15/1987, capitalized interest was to
occur in 1993.
to cover interest through 1992 on the 1987 HNYC bonds. Assume first principal and interest payment
(5) Pursuant to the 1990 Revenue Bond Resolution, excess revenue funds available are to deposited.into a Special Fund
so that the amount is not in excess of $17 million in 1990, $34 million in 1991, and $51 million in 1992.
The purpose is to provide additional coverage in case of insufficient revenues and the monies are available
for any purpose the City and Authority jointly decide. The anlysis assumes that the monies are deosited
in the Fund for three years and then are released as Joint Purpose Monies in.1993 as reflected by the $51 million in
1990-1992
Joint Purpose Monies in 1993 plus the traditional split that occurs from Available Amounts. During the years
the analysis assumes that remaining Available Amounts go to the City as the deposit to the Special Fund represents the use
that the BPCA and the City decide for Joint Purpose Monies.
(6) Assumes BPCA anticipated future infrastructure financings of $22.5 million and $33.5 million net proceeds in 1991 and
1992 respectively. Net Proceeds account for 67% of bonds issued to account for three years of capitalized interest,
costs of issuance, and reserve fund deposits.
(7) Assumes HNYC anticipated future financings for the Housing New York Program of $140 million $52 million,
$36.5 million, and $28.9 million in net proceeds for the consecutive years commencing in 1900 and ending in 1993.
Net Proceeds account for 62.22% of bonds issued to account for four years of capitalized interest, costs of issuance,
reserve fund deposits.
(8) Assumes a conservative 2 times debt coverage ratio.
(9) Assumes the first year leveraged amounts could be issued would be 1994 after anticipated future financings are complete.
Assumes 3 years of capitalized interes thus coverage begins in 2004.
(10) Remaining city split monies are applied until 2000 for the new hsg. program. Additionally the $50 million remittance to the
City obligation under the 1989 A&C is assumed to be paid to the new housing program. The $0 million is fulfilled in
the year 1992 and is shown as City split amounts.
(11) These are the same amounts of extra revenues needed under the Base Case scenario that are applied to the new hsg.
program. Note that after 2000 these monies are no longer necessary and represent the amount of freed monies under
this scenario.
(12) These represent the additional amounts that were paid from other revenue sources under the Base Case scenario in years
2000, 2001, 2002, and 2003 that were not required under the alternative leverage scenerio.
(13) These amounts are city split benefits that are available to the city in the years 2001 and 2002
The $8.9 million represents the greater city split amounts that
as a result of early fulfillment of hsg8 -program.
are realized in year 2003 under the M. .U. scenario as a result of no debt service requirements.
(14) These are the monies that are freed early (net city benefits and the other revenues)for other non housing uses
under the leveraged scenario due to early fulfillment of housing program in 2000.
*
All figures derived from 1986 and 1990 Battery Park City Authority Official Statements, as well
as the 1987 Housing New York Corporation Official Statement. A&C annual cash payments
are derived from the 1989 Agreement and Consent Document.